Private-label credit-card provider Bread Financial has reported a profit for the fourth quarter, despite warning of potential challenges in the future. The company expressed concerns about slowing consumer spending and increasing credit losses in 2024. One significant factor that could impact revenue is a proposed reform on consumer credit late fees.
In the December quarter, Bread Financial recorded earnings of $43 million, or 87 cents per share. This marks a significant improvement from the continuing operations loss of $134 million, or $2.68 per share, reported in the same period a year earlier. The company exceeded average expectations, with Wall Street analysts forecasting a loss of 64 cents per share, according to FactSet.
Although fourth-quarter revenue declined by 2% to $1.02 billion, it still surpassed the estimated $987 million set by analysts. Bread Financial attributes the decline to reduced consumer spending and the sale of its BJ’s Wholesale Club portfolio.
Looking ahead to 2024, Bread Financial anticipates a decrease in revenue in the low to mid-single percentage digits. However, the company warns that if the Consumer Financial Protection Bureau implements its proposed late-fee reform, this could result in a 25% decrease in revenue for the fourth quarter of 2024.
In response to anticipated regulatory changes, Chief Executive Ralph Andretta stated that the company is proactively implementing plans to address these adjustments. The team is actively engaging with brand partners and intends to execute necessary mitigating actions before the final rule takes effect.
At the end of the year, Bread Financial held $19.33 billion in outstanding credit-card and other loans. During the fourth quarter, the company recorded a net loss rate of 8%. It anticipates that net loss rates will peak in the first half of this year, reaching rates in the mid-to-high 8% range.
In conclusion, Bread Financial’s profitable fourth quarter is overshadowed by concerns regarding future consumer spending, credit losses, and the potential impact of proposed regulatory changes. The company remains focused on adapting to these challenges and working closely with its brand partners to mitigate their effects.