Household International
gets boost from credit card
changes
By Greg Burns
Tribune Staff Writer
January 28, 1999
Shares of Household International Corp. have edged
higher over the past two weeks on the heels of favorable
financial results and a partial revision of its credit-card
business.
The stock closed Thursday $1.63 higher, at $43.63, up
from $40.81 just before its Jan. 20 earnings
announcement.
The Prospect Heights-based consumer finance company
is refocusing its U.S. MasterCard/Visa business on
fewer, stronger card programs. While it plans to retain
its General Motors and AFL-CIO Union Privilege
cards, it is cutting back other cards aimed at mainstream
consumers.
Household also has entered into an alliance with
Renaissance Holdings, a privately held issuer of cards to
less-wealthy, "non-prime" consumers.
In essence, the company is boosting its emphasis on the
blue-collar customers of its Household and Beneficial
branches, analysts said Thursday.
"It's positive in the sense that the traditional credit-card
business is very competitive," said Joel Gomberg, equity
analyst at Chicago's William Blair & Co. "Their target
customer is more working-class Americans. It's
consistent with their consumer-finance heritage."
Still, the tweaking of Household's credit-card business
amounts to only a "modest" change in strategy, said
Gomberg, who figures that credit-cards account for no
more than 15 percent of Household profits.
The company also is getting a boost from a roadshow it
held in New York on Tuesday, when it told analysts that
its $7.2 billion takeover of rival consumer lender
Beneficial Corp. is proceeding smoothly.
Home-equity lending, installment loans and operations in
the United Kingdom all are "doing well," Gomberg said.
Added analyst Mark Alpert of BT Alex. Brown Inc.:
"The weakest part of their business performance has
been their credit cards, so the final piece of the puzzle is
in place."
The company reported fourth-quarter earnings of
$349.9 million, up 71 percent from $204.8 million in the
year-earlier quarter. Earnings per share of 71 cents were
on track with analysts' consensus estimates.
Sales rose 2.2 percent to $1.87 billion, from $1.83
billion a year ago.
For the year, the company reported earnings of $524.1
million, or $1.03 per share, down from $940.3 million,
or $1.93 per share.
That decline reflects a $118.5 million after-tax gain on
the sale of Beneficial's Canadian operations, and an
after-tax charge of $751 million related to costs of the
Beneficial merger.
Revenues for the year were up 3.5 percent to $7.15
billion, from $6.91 billion.
Neither chief executive William Aldinger, nor a
spokesman, could comment Thursday.
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