ADS - Alliance Data Systems

[kab60]

Couldn't you guys take your argument somewhere else? Thanks in advance. Some of us are trying to make money.

The SYF/WMT thingie is one of the reasons I went with ADS over SYF (that and great capital allocation plus insider ownership and experienced leadership). I think smaller clients are stickier and have less bargaining power (that said, they still have some big accounts that would be bad to lose).

[tol1]

Couldn't you guys take your argument somewhere else? Thanks in advance. Some of us are trying to make money.

The SYF/WMT thingie is one of the reasons I went with ADS over SYF (that and great capital allocation plus insider ownership and experienced leadership). I think smaller clients are stickier and have less bargaining power (that said, they still have some big accounts that would be bad to lose).

What % of loan receivables and interest income are ADS' top 3 or 5 customers? Experienced leadership + insider O/S + cap allocation holds true for SYF as well btw.

[kab60]

Couldn't you guys take your argument somewhere else? Thanks in advance. Some of us are trying to make money.

The SYF/WMT thingie is one of the reasons I went with ADS over SYF (that and great capital allocation plus insider ownership and experienced leadership). I think smaller clients are stickier and have less bargaining power (that said, they still have some big accounts that would be bad to lose).

What % of loan receivables and interest income are ADS' top 3 or 5 customers? Experienced leadership + insider O/S + cap allocation holds true for SYF as well btw.

Don't think they disclose it. #1 is L Brands at 16 pct. of Card Service revenue and Ascena #2 at 13 pct. revenue. L Brands expires in 2019, so there's a bit of risk/opportunity (SYF has 20 pct. of total interest/fees up for grabs next year).

Overall the 10 largest customers account for some 52 pct. of revenues in Cards Services, whereas for SYF the five largest account for 53 pct. of total interest and fees.

Can't say definately which model is better, but from a high lever I prefer smaller retailers where ADS also delivers marketings solutions etc.

That said, I also think SYF looks interesting, which brings me to the point about capital allocation, insider ownership and management.

Didn't mean to say that SYF were disadvantaged, but I like how ADS' took advantage of the GFC to buy back shares on the cheap. Few companies did that (SYF wasn't public, so no record).

Not sure how one puts a number on that, but it makes me sleep better at night knowing that if a downturn hits (seems like one is long overdue), the companies I'm invested should be able to gain from it (not all of my investments but AZO, AN and ADS do). It makes it easier to just forget about macro and stay 100 pct. invested.

Also, there's some option value in LoyaltyOne. I think they should sell it if/when they dress it up a bit and it fetches a nice price. With ValueAct onboard I suppose they'll do it if it creates value.

[mwtorock]

Couldn't you guys take your argument somewhere else? Thanks in advance. Some of us are trying to make money.

The SYF/WMT thingie is one of the reasons I went with ADS over SYF (that and great capital allocation plus insider ownership and experienced leadership). I think smaller clients are stickier and have less bargaining power (that said, they still have some big accounts that would be bad to lose).

What % of loan receivables and interest income are ADS' top 3 or 5 customers? Experienced leadership + insider O/S + cap allocation holds true for SYF as well btw.

Don't think they disclose it. #1 is L Brands at 16 pct. of Card Service revenue and Ascena #2 at 13 pct. revenue. L Brands expires in 2019, so there's a bit of risk/opportunity (SYF has 20 pct. of total interest/fees up for grabs next year).

Overall the 10 largest customers account for some 52 pct. of revenues in Cards Services, whereas for SYF the five largest account for 53 pct. of total interest and fees.

Can't say definately which model is better, but from a high lever I prefer smaller retailers where ADS also delivers marketings solutions etc.

That said, I also think SYF looks interesting, which brings me to the point about capital allocation, insider ownership and management.

Didn't mean to say that SYF were disadvantaged, but I like how ADS' took advantage of the GFC to buy back shares on the cheap. Few companies did that (SYF wasn't public, so no record).

Not sure how one puts a number on that, but it makes me sleep better at night knowing that if a downturn hits (seems like one is long overdue), the companies I'm invested should be able to gain from it (not all of my investments but AZO, AN and ADS do). It makes it easier to just forget about macro and stay 100 pct. invested.

Also, there's some option value in LoyaltyOne. I think they should sell it if/when they dress it up a bit and it fetches a nice price. With ValueAct onboard I suppose they'll do it if it creates value.

best said.

[Saluki]

Can't say definately which model is better, but from a high lever I prefer smaller retailers where ADS also delivers marketings solutions etc.

This is a sample size of 1, but when I was in college in the 90s, I worked at a regional retailer in with about 30 stores. Our store card was issued by GE Capital  and Finance(now SYF). I was very impressed with how much more a  customer would buy on a store card, and how loyal they were.  Many times I would see someone come in for a $2k large screen TV, get issued a store card with 90 days no interest (24% after that!)and walk out with a $3k tv, speakers, cables, extended warranty etc.

The hardest part of the sale is getting the customer to actually come in the door, and if a credit card issuer can offer you services to get people in the door (or to spend more when they get there) it takes a lot of weight off the retailer's shoulders. For a smaller retailer that's a big lock in. 

Do you know how the phone company used to sell ads in the yellow pages in the old days?  If you were, say, a pizzeria, they would give you a "free ad" and give you a new phone number and phone. Usually, they place it next to your old phone.  After a few months, the salesperson comes to take out the new phone...the one that rings all the time with the orders. Then the pizza guy says "no! how much do I have to pay you to keep it?". 

The customer has a reason to keep using the card (I don't want to lose my airmiles etc.) and the retailer has a reason to keep using the card (the other cards charge the same, but I'm losing customers or getting smaller ticket sizes). 

[HJ]

Couldn't you guys take your argument somewhere else? Thanks in advance. Some of us are trying to make money.

The SYF/WMT thingie is one of the reasons I went with ADS over SYF (that and great capital allocation plus insider ownership and experienced leadership). I think smaller clients are stickier and have less bargaining power (that said, they still have some big accounts that would be bad to lose).

What % of loan receivables and interest income are ADS' top 3 or 5 customers? Experienced leadership + insider O/S + cap allocation holds true for SYF as well btw.

Don't think they disclose it. #1 is L Brands at 16 pct. of Card Service revenue and Ascena #2 at 13 pct. revenue. L Brands expires in 2019, so there's a bit of risk/opportunity (SYF has 20 pct. of total interest/fees up for grabs next year).

Overall the 10 largest customers account for some 52 pct. of revenues in Cards Services, whereas for SYF the five largest account for 53 pct. of total interest and fees.

Can't say definately which model is better, but from a high lever I prefer smaller retailers where ADS also delivers marketings solutions etc.

That said, I also think SYF looks interesting, which brings me to the point about capital allocation, insider ownership and management.

Didn't mean to say that SYF were disadvantaged, but I like how ADS' took advantage of the GFC to buy back shares on the cheap. Few companies did that (SYF wasn't public, so no record).

Not sure how one puts a number on that, but it makes me sleep better at night knowing that if a downturn hits (seems like one is long overdue), the companies I'm invested should be able to gain from it (not all of my investments but AZO, AN and ADS do). It makes it easier to just forget about macro and stay 100 pct. invested.

Also, there's some option value in LoyaltyOne. I think they should sell it if/when they dress it up a bit and it fetches a nice price. With ValueAct onboard I suppose they'll do it if it creates value.

Well made points. 

Counter arguments:  1) Neither L Brands nor Ascena are the healthiest of brands.  Look at their respective stocks.  2) The reason they were able to buy back stock was because they were not regulated as a bank  holding company, so no regulator can tell them what to do with capital when the business looks the scariest.  This structural advantage, however, comes also with disadvantages, prominently the ability to increase funding for receivable growth at a meaningful scale.  At $19 billion receivable, are they kind of at the upper bound of the size of their operation without tapping retail deposit funding, and by extension subjecting themselves to bank holding company regulations?  Previous generation credit card monolines have either been acquired by a bank holding company or became bank holding companies themselves as they got to this scale.  First USA, MBNA, Cap One, and today, Synchrony. 

Don't have a strong view on one stock vs. another.

[kab60]

Couldn't you guys take your argument somewhere else? Thanks in advance. Some of us are trying to make money.

The SYF/WMT thingie is one of the reasons I went with ADS over SYF (that and great capital allocation plus insider ownership and experienced leadership). I think smaller clients are stickier and have less bargaining power (that said, they still have some big accounts that would be bad to lose).

What % of loan receivables and interest income are ADS' top 3 or 5 customers? Experienced leadership + insider O/S + cap allocation holds true for SYF as well btw.

Don't think they disclose it. #1 is L Brands at 16 pct. of Card Service revenue and Ascena #2 at 13 pct. revenue. L Brands expires in 2019, so there's a bit of risk/opportunity (SYF has 20 pct. of total interest/fees up for grabs next year).

Overall the 10 largest customers account for some 52 pct. of revenues in Cards Services, whereas for SYF the five largest account for 53 pct. of total interest and fees.

Can't say definately which model is better, but from a high lever I prefer smaller retailers where ADS also delivers marketings solutions etc.

That said, I also think SYF looks interesting, which brings me to the point about capital allocation, insider ownership and management.

Didn't mean to say that SYF were disadvantaged, but I like how ADS' took advantage of the GFC to buy back shares on the cheap. Few companies did that (SYF wasn't public, so no record).

Not sure how one puts a number on that, but it makes me sleep better at night knowing that if a downturn hits (seems like one is long overdue), the companies I'm invested should be able to gain from it (not all of my investments but AZO, AN and ADS do). It makes it easier to just forget about macro and stay 100 pct. invested.

Also, there's some option value in LoyaltyOne. I think they should sell it if/when they dress it up a bit and it fetches a nice price. With ValueAct onboard I suppose they'll do it if it creates value.

Well made points. 

Counter arguments:  1) Neither L Brands nor Ascena are the healthiest of brands.  Look at their respective stocks.  2) The reason they were able to buy back stock was because they were not regulated as a bank  holding company, so no regulator can tell them what to do with capital when the business looks the scariest.  This structural advantage, however, comes also with disadvantages, prominently the ability to increase funding for receivable growth at a meaningful scale.  At $19 billion receivable, are they kind of at the upper bound of the size of their operation without tapping retail deposit funding, and by extension subjecting themselves to bank holding company regulations?  Previous generation credit card monolines have either been acquired by a bank holding company or became bank holding companies themselves as they got to this scale.  First USA, MBNA, Cap One, and today, Synchrony. 

Don't have a strong view on one stock vs. another.

I actually came across ADS after I took a long look at L Brands last year while searching the retail sector for stocks that had been hammered by the Amazon-effect. Didn't love the balance sheet and thought it too tricky to select winning brands, so ADS seemed like a nice way to play the space without too much single company risk. I think L Brands will do fine (maybe not as an investment), but either way retail is a tough biz, so ADS' customers will come and go like they always have I think.

Not sure how to handicap the bank risk. Any ideas?

[stahleyp]

Is it being hit today due to CFO retiring?

[Saluki]

Is it being hit today due to CFO retiring?

It must be, I did a time restricted  google news seach  and that's the only potentially negative article that has come out in the last 24 hours.

[bizaro86]

Could Wal mart switching be affecting the market's  perception of switching costs and their moat?