Costco's (COST) New Partnership With Citigroup (C) Not Quite Smooth Sailing
Zacks Investment Research | Jun 23, 2016 07:19AM ET
Costco (NASDAQ:COST) Wholesale (NYSE:C) has experienced a decrease in sales recently, presumably due to difficulties involving transitioning customers from American Express (NYSE:AXP) to Citigroup (NYSE:C) cards.
Costco ended their 16-year relationship with American Express after the two firms could not agree on renewal terms. The new partnership was announced in March of 2015, and involves Citi exclusively issuing their co-brand credit cards in all U.S. locations along with Visa (NYSE:V) replacing American Express go-to Costco credit card.
Problems with New Deal?
The new cards became available for use on Monday, when Citi acquired the Costco Portfolio from American Express. However, many customers have complained, citing lengthy wait times as well as difficulty activating their new cards.
As Bloomberg , some customers have experienced delays in service while others have not yet received their cards.
Why the Switch?
The partnership is believed to serve as a way for Costco to reduce costs. Specifically, analysts believe that the deal should save Costco anywhere between $60M-$150M per year moving forward.
Costco currently sits at a Zacks Rank #4 (Sell). There is 100% agreement in downward estimate revisions for the current quarter, and 67% agreement in downward revisions for next quarter. That coupled with an average EPS surprise of -1.91% have negatively impacted the outlook for Costco.
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