Rich American Express customers spend freely, with one exception

American Express has built a strong reputation for catering to wealthier customers who value the premium perks offered by the credit card company, particularly in the realms of travel and dining. This focus on high-end clientele has shielded American Express from concerns surrounding a potential slowdown in consumer spending.

In the second quarter, total spending on Amex cards saw a notable 7% increase, on par with the first quarter and higher than the previous year’s 6% rise. However, while spending on goods and services continued to grow, travel spending experienced a decline. Specifically, airline spending remained flat compared to the previous year, according to a recent statement from American Express.

The weakness in travel spending was primarily attributed to a slowdown in economy class domestic airfare. Despite this, Amex reported a 10% increase in spending on premium cabins and a 9% rise in hotel bookings costing more than $5,000. Nevertheless, analysts have expressed concerns over this vulnerability, particularly in light of American Express’s airline partnerships and network of airport lounges.

Furthermore, declining airfare prices have also contributed to the decrease in travel spending, as consumers are spending less on airline tickets. In June, airfare prices dropped by 3.5% year-over-year, while overall inflation rates rose, as reported by the Bureau of Labor Statistics.

Despite surpassing expectations for second-quarter profits and revenues, and reaffirming its guidance for 2025, American Express saw a 2.5% drop in its stock price during midday trading. Year-to-date, the company’s shares have only risen by less than 4%, trailing behind other financial institutions like JPMorgan Chase and Citigroup.

Investor concerns have largely centered around the costs associated with Amex’s rewards programs, particularly in light of the company’s recent launch of a revamped Platinum card. American Express faces increased competition in the premium card sector from rivals such as JPMorgan, Capital One, and Citigroup.

Analysts have noted that the prevailing bearish sentiment towards American Express stems from the perception that the company must intensify its efforts to drive growth, potentially necessitating increased expenditures to attract and retain customers. Despite these challenges, American Express remains committed to maintaining its competitive edge in the market.