Alliance Data 1Q Net Down 44% As Frequent Flier Programs Fall

   DOW JONES NEWSWIRES 
 

Alliance Data Systems Corp. (ADS) posted a 44% decrease in first-quarter net income as the credit-card processor saw currency effects drag down revenue and saw results fall at its frequent-flier programs.

The company had previously been recording strong results from frequent flier and loyalty programs, as consumers have boosted the company's results by increasingly turning to programs that give back for spending as they look to trim their budgets. But that trend didn't hold up this quarter.

Net income fell to $27.9 million, or 45 cents a share, compared with $49.3 million, or 61 cents a share, a year earlier.

Excluding stock-based compensation and other one-time items, cash earnings were $1.19 a share, compared with the $1 a share it earned a year earlier and the $1.10 a share it had been expecting to earn.

Revenue slipped 4% to $480 million, below the $488 million analysts polled by Thomson Reuters had been expecting. Excluding currency exchanges, revenue would have increased 4%.

In its loyalty-services segment - which operates frequent-flier programs and gasoline credit cards - adjusted earnings before interest, taxes, depreciation and amortization rose 34%, though revenue fell 7% as foreign currency exchanges hurt the results.

The Epsilon segment - which provides loyalty programs for a range of companies including Barnes & Noble Inc. (BKS) and Pfizer Inc. (PFE) - posted a 6% decrease in adjusted earnings on a 2% rise in revenue as the company said the year-ago results were strong and the latest quarter "tracked" expectations.

For the private-label credit segment, revenue slumped 11% and earnings tumbled 34%, while its smaller private-label services unit saw revenue rise 4% and earnings rise 11%.

For the second quarter, the company said it is expecting cash earnings of about $1.05 a share, below the $1.22 analysts had been projecting. And Alliance Data said it is maintaing its full-year guidance of earnings of "at least" $5.15 a share, though it had previously called for a range of $5.15 to $5.20.

Alliance Data shares have somewhat recovered from last year's steep fall, now down 22% over the past 12 months after nearly doubling in the past month. Much of the gains have come just as the company put in place a new chief executive, Edward Heffernan, who took over March 1 when J. Michael Parks moved to the sole role of chairman.

-By David Benoit, Dow Jones Newswires; 201-938-2472; [e-mail]