New Synchrony CEO: ‘We have never been in a stronger position’
STAMFORD — The new CEO of Synchrony, the country’s largest provider of private-label credit cards, said Tuesday that he was bullish about the company’s recovery from the disruption of the coronavirus pandemic — a forecast that highlighted his confidence in businesses such as health-and-wellness financing.
Brian Doubles led his first earnings call since taking over as CEO earlier this month, as Stamford-based Synchrony reported Tuesday its financial results for the first quarter of 2021. Among the key numbers, quarterly revenues decreased 12 percent year over year to $3.4 billion, a trend mainly due to lower financing charges and late fees.
Profits ballooned nearly 270 percent to about $1 billion, with the bottom line factoring in an 80 percent decrease in the provision for credit losses. Synchrony officials cited improvements in “customer payment behavior” including a year-over-year decrease from 5.4 percent to 3.6 percent in the net charge-off rate, which refers to debts the company does not expect to recoup.
“We demonstrated that we were able to rapidly adapt to operate in a new environment, while continuing to keep our eye on the long term,” Doubles told investment analysts during the earnings call. “In my opinion, we have never been in a stronger position.”
Following the first-quarter earnings release, Synchrony shares closed Tuesday at about $41, down 2 percent from Monday. They have hit a 52-week high of about $44 and a 52-week low of around $15.
In the past year, Synchrony has seen reduced customer activity, as result of the pandemic-sparked economic downturn. In the first quarter, it recorded an average of about 66 million customer accounts, down 8 percent from a year ago. At the same time, its “loan receivables” balance of loans owed by customers decreased 7 percent to about $77 billion.
But there are signs of improving consumer confidence. Doubles cited the 8 percent increase in customers’ purchase volume to nearly $35 billion.
“The fact that we saw 8 percent purchase volume growth — and 11 percent (growth) in retail cards — is a really positive indicator,” Doubles said. “But that’s not where it should be in a fully functioning, open economy. I think there’s room across all the growth metrics to go further from here. We’re still in the early innings in terms of a recovery. But most of the trends we’re seeing are pretty positive.”
CareCredit, the company’s health-and-wellness financing platform, is an area where Doubles anticipates major growth in the near future.
Reflecting the overall drop in customer accounts, CareCredit accounts decreased 11 percent year over year to 5.7 million. But the company is making major investments in the business, highlighted by its announcement in January that it would acquire Allegro Credit, whose specialties include consumer financing for audiology products and dental services.
“CareCredit is probably the most exciting growth opportunity that we’ve got in the company today,” Doubles said. “High-deductible plans are increasing in popularity, so less and less is being covered by insurance — and that’s really where CareCredit comes in. We’re a big player in the space today, but financing options in this space is still a very small fraction of the potential spend that’s out there. There is just a ton of room for growth.”
CareCredit can also be used for veterinary care. In 2019, Synchrony acquired pet-insurance provider Pets Best.
“Americans spend more than $100 billion on pet expenditures,” Doubles said. “There is a large market … with significant opportunity to provide new products, financing alternatives and services.”
In the past quarter, Synchrony added 10 customer programs and renewed 10. But it will see a significant departure next year because it will be ending its two-decade card partnership with Gap Inc. London headquartered banking giant Barclays will take over Gap’s card program.
Synchrony has been issuing cards for Gap for about 22 years, with the latter comprising one of Synchrony’s five-largest retail card partners.
“At the end of the day, this one just came down to terms and price, and our competition (Barclays) was just a lot more aggressive on both,” Doubles said. “(Gap) were looking for guaranteed revenue that increased annually regardless of how the program performed. For context, just given the turnaround that they’ve been working through, the program had been shrinking. So there’s really only so far you can go to guarantee those types of payments on a program like that.
“We tried to reach an agreement. At the end of the day, there just wasn’t a way to get our interests aligned. But I do think this is a pretty unique situation.”
Westport resident Doubles has succeeded Margaret Keane, who had served as CEO since Synchrony’s 2014 spin-off from GE into an independent company. Keane is now Synchrony’s executive chairwoman.
Doubles is also Synchrony’s president and has served in that role since 2019. He previously served several years as the firm’s chief financial officer.
Synchrony, the No. 170 company on last year’s Fortune 500 list, is headquartered at 777 Long Ridge Road in Stamford, near the Merritt Parkway’s Exit 34. It employs a total of about 16,500 people.