(Reuters) - Warehouse club retailer Costco Wholesale Corp (COST.O) will stop accepting American Express Co's (AXP.N) credit cards at U.S. stores from next year, threatening nearly 8 percent of the worldwide annual spending on its cards.
AmEx said on Thursday the loss of the contract would hurt earnings for the next two years, sending its shares down as much as 7 percent and wiping out about $6 billion of market value.
JPMorgan Securities analyst Tien-tsin Huang said the loss of Costco would reduce spending on AmEx cards by about $80 billion a year, including their use at businesses other than Costco's 468 stores in the United States and Puerto Rico.
AmEx said it expected earnings per share growth in 2015 to be flat to down modestly from 2014 as the company invests aggressively to prepare for the termination of the contract.
The agreement between AmEx and Costco is set to end after 16 years on March 31, 2016. Costco warehouses in the United States currently accept only American Express cards.
"We were unable to reach terms that would have made economic sense for our company and shareholders," American Express CEO Kenneth Chenault said in a statement.
Competition in the co-branded card business has intensified in recent years, leading to higher renewal costs, Chenault said on a conference call.
Costco declined to comment on the move, which follows its decision to drop AmEx in Canada last year.
Capital One, whose shares were up 2.6 percent in early afternoon trading, did not respond to a request for comment. MasterCard's shares were up 2.7 percent.
Costco, which sells everything from jewelry to fresh produce at its cavernous members-only stores, reported revenue of $112.64 billion for its fiscal year ended Aug. 31, 2014.
AmEx shares were down 6.1 percent at $80.75 in afternoon trading on the New York Stock Exchange. Costco's shares were unchanged at $147.47.
Reporting by Avik Das in Bengaluru; Editing by Savio D'Souza, Sriraj Kalluvila and Ted Kerr