Visa beats profit expectations as CFO sees ‘no evidence of pullback’ in spending

Visa Inc. beat expectations with its latest results on Tuesday and sent an optimistic signal to investors about the resilience of spending volumes in the current macroeconomic climate.

Amid growing concern about the state of the consumer given factors such as rising inflation and rising interest rates, Visa
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joined another card company American Express Co.
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stating that the uncertain landscape has not yet negatively affected volumes.

“We see no evidence of a pullback in consumer spending,” chief financial officer Vasant Prabhu said during the company’s earnings call.

Executives acknowledged that consumers may well change their behaviors, but not in a way that would show up in Visa’s results.

“What we don’t know is what level of substitutions are taking place, where people might be buying more basics and fewer discretionary items but they’re spending at the same level as them, or whether, as the some retailers said people are swapping brands to private labels,” chief executive Al Kelly said on the call, according to a Sentieo transcript.

He added that ‘obviously inflation is in our numbers and people are likely…to make changes to what they buy’, but ‘they’re not changing how they pay’ .

Visa’s revenue for the third fiscal quarter rose from $6.1 billion to $7.3 billion, while analysts had expected $7.1 billion.

The company posted net income of $3.41 billion, or $1.60 per share, compared with $2.58 billion, or $1.18 per share, the year before. Analysts tracked by FactSet had expected $1.73 per share in GAAP earnings. On an adjusted basis, Visa earned $1.98 per share, up 33% from a year earlier and above the FactSet consensus of $1.75 per share.

Visa saw payment volume increase by 12%, with transactions processed increasing by 16%. Cross-border volume increased by 40% while cross-border volume excluding intra-European transactions increased by 48%.

“Consumers are back on the road, visiting various corners of the world, resulting in cross-border travel volume surpassing 2019 levels for the first time since the pandemic began in early 2020,” Kelly said in a statement. communicated. “Although the economic outlook is unclear, we remain confident in our ability to execute with discipline.”

Visa executives said on the earnings call that the pace of travel recovery has continued to exceed their expectations since late last year.

“The next and maybe the last step in resuming cross-border travel will have to wait for a full reopening in China, which we don’t expect in the near future,” Prabhu added.

Shares were almost flat after hours trading on Tuesday.

Visa remained optimistic about online spending, with Kelly noting that cardless spending, excluding travel, was significantly above pre-pandemic levels in the last quarter.

The company’s upbeat tone on e-commerce comes after Shopify Inc.
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Managing Director Tobi Lütke earlier on Tuesday admitted he was “wrong” to predict that “the share of dollars flowing through e-commerce rather than brick-and-mortar retail…would jump permanently 5 or even 10 years from now.”

Visa’s Prabhu told MarketWatch that Visa “never believed when we saw big spikes that everything was sustainable,” but at the same time he believes e-commerce is still “ahead” of what it is. would be if the pandemic had not happened.

While Visa over the past few quarters has highlighted some of its cryptocurrency-related partnerships during earnings calls, the company didn’t mention the word “crypto” at all during the latest call, a review has found. from the Sentieo transcript.

Prabhu told MarketWatch that the crypto downturn “hasn’t changed our perspective on crypto at all” and that Visa is still “very focused on everything that we used to do” like enabling people to buy cryptocurrencies or allow them to use their crypto accounts to buy and sell things.

Visa’s earnings come as companies have given mixed signals so far in the reporting season about how consumer behavior is changing and not changing in a changing economy.

While Walmart Inc.
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cut its profit forecast on Monday evening, warning that inflationary pressures around food prices left consumers with less disposable income for categories like apparel, American Express executives were optimistic last week about high-end spending trends. Amex Chief Financial Officer Jeff Campbell told MarketWatch that “if you think about the actual signs of stress, we don’t see any” at the company.

Additionally, earlier Tuesday, Fiserv Inc.
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Chief Executive Frank Bisignano said during the acquiring company’s earnings call that “the consumer remains resilient.”

Visa’s Kelly said that “it’s simply too early to draw definitive conclusions about inflation,” although he noted that headline inflation numbers don’t necessarily correlate with how inflation should show up in Visa spending.

“Consumers simply aren’t buying houses or used cars with their Visa cards, for example, so we’re seeing a multi-point gap between headline inflation and inflation in card-related spending categories. “, did he declare.

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