Yahoo Finanza Bread Financial Holdings Inc (BFH) Faces Earnings Pressure Amid Economic Challenges
Net Income: $134M, a significant decrease of 71% year-over-year, falling short of the estimated $160.08M.
Revenue: $991M, down 23% from the previous year, below the estimated $996.99M.
Earnings Per Share (EPS): Reported at $2.70, below the estimated $3.05.
Tangible Book Value Per Share: Increased by 20% year-over-year to $45.96.
Common Equity Tier 1 (CET1) Capital Ratio: Improved by 80 basis points year-over-year to 12.6%.
Delinquency and Net Loss Rates: Delinquency rate increased to 6.2% from 5.7% in Q1 2023; net loss rate rose to 8.5% from 7.0%.
Share Repurchases: Completed $11M of share repurchases, representing 293,000 shares at an average price of $37.54.
Bread Financial Holdings Inc (NYSE:BFH) released its 8-K filing on April 25, 2024, revealing a challenging quarter with significant declines in net income and revenue. The company reported a net income of $134 million and revenue of $991 million for the first quarter of 2024, falling short of analyst estimates which projected earnings of $3.05 per share on revenues of $996.99 million.
Bread Financial, a tech-forward financial services company, offers personalized payment, lending, and saving solutions. Originally formed from JCPenney's credit card processing unit and The Limited's credit card bank business, Bread Financial has evolved into a significant player in the private label and co-branded credit card markets, alongside managing loyalty programs and marketing services.
Financial Performance and Strategic Challenges
The first quarter of 2024 was marked by a 23% decline in revenue compared to the same period in 2023, primarily due to the sale of the BJ's Wholesale Club portfolio and strategic credit tightening. This decline was exacerbated by a 71% decrease in net income, influenced by the absence of the previous year's gain on sale and related reserve release. The company's earnings per diluted share stood at $2.70, significantly lower than the $9.08 reported in the first quarter of 2023.
Amidst a tough macroeconomic environment characterized by persistent inflation and higher interest rates, Bread Financial has observed a moderation in consumer spending, particularly in discretionary and big-ticket purchases. The company's proactive credit tightening initiatives have also impacted loan growth, reflecting a disciplined approach to credit risk management.
Operational Highlights and Future Outlook
Despite the financial downturn, Bread Financial has made strides in strengthening its balance sheet. The company successfully extended its senior debt maturities and reduced parent-level debt by $100 million. Additionally, it reported a 20% year-over-year increase in tangible book value per share and an 80 basis point increase in the common equity tier 1 capital ratio.
Looking ahead, Bread Financial's 2024 outlook is cautious, factoring in the impacts of the CFPB's final rule on credit card late fees and anticipating challenges such as slower sales growth and pressure on net interest income from potential Federal Reserve rate cuts. The company expects total revenue growth for 2024 to be down in the mid- to high-teen range, excluding gains on portfolio sales.
Management's Commentary and Investor Relations
Ralph Andretta, President and CEO of Bread Financial, emphasized the company's focus on strong risk management and capital preservation in light of ongoing economic pressures. CFO Perry Beberman also highlighted the company's efforts in mitigating the impacts of regulatory changes and maintaining robust profit margins despite higher loss rates.
Investors and stakeholders can contact Brian Vereb or Susan Haugen at Bread Financial's investor relations for more detailed information, while media inquiries can be directed to Rachel Stultz.
In summary, Bread Financial Holdings Inc faces a challenging fiscal environment with significant impacts on its financial performance. However, strategic measures to strengthen the balance sheet and mitigate regulatory impacts are in place, aiming to stabilize and improve the company's financial health in the upcoming periods.
Explore the complete 8-K earnings release (here) from Bread Financial Holdings Inc for further details.
This article first appeared on GuruFocus.
