The platinum economy

With the money that hedge-fund bros are dropping on Moncler jackets and Eurotrips to find themselves, it’s no wonder American Express is having a good year.

The premium credit card company reported record third-quarter revenue of $20.1 billion Friday, up 9% year-over-year, while profit jumped 28% to $3.71 billion. Card spending grew 8% to $454 billion, prompting AmEx to raise its full-year earnings outlook.

The company’s results offer another glimpse into the K-shaped economy, where affluent consumers continue splurging while lower-income households pull back with finances tight. AmEx’s well-heeled cardholders certainly aren’t holding back: Travel and entertainment spending jumped 10%, including a 13% increase on flights and 9% at restaurants.

A luxury paradox: But not every business catering to wealthy shoppers is cashing in. Citi’s credit card data showed US luxury purchases actually fell 6% year-over-year in September, while on Thursday Gucci parent Kering reported a 6% decline in comparable Gucci sales last quarter.

The divergence highlights how uneven spending has become, with luxury retail brands reliant on aspirational shoppers under particular pressure. Luxury firms like LVMH and Hermès are trading at their cheapest levels in a decade as the industry endures lackluster sales.

A tale of two wallets

That uneven spending is part of a much broader economic divide. The Federal Reserve’s latest Beige Book found that high-income households were driving consumer spending in more than half of its districts, while financially strained workers increasingly relied on retirement withdrawals and wage advances to make ends meet.

And while wealthier consumers are helping businesses keep sales growing, those gains aren’t necessarily translating into more jobs. Even AmEx, fresh off record revenue, disclosed plans to cut roughly 5% of its workforce, or about 3,500 positions, as part of a restructuring to “prepare for AI.” Barclays also announced roughly 5,000 job cuts this week, while eBay disclosed plans to eliminate about 1,000 positions.

A balancing act

On paper, the cuts could work in AmEx’s favor. CEO Stephen Squeri said the restructuring would free up resources for investment and innovation.

But investors were less enthusiastic, sending shares down 3.73% this afternoon. Revenue and card spending volumes both fell slightly short of expectations, raising questions about whether AmEx can sustain its growth. Still, Jefferies maintained its Hold rating and $330 price target, noting that the earnings beat benefited from lower-than-expected provisions for credit losses.

Whether AmEx’s cost-cutting strategy pays off remains to be seen. Fortunately for its credit cards, their hedge-fund clients are still finding ways to help maximize shareholder value, one questionable puffer coat at a time.—SY