Bread Financial Holdings Inc ((BFH)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Bread Financial Holdings Inc. recently held an earnings call that depicted a mixed sentiment. The company showcased positive strides with the addition of significant brand partners and improvements in capital levels and operating leverage. However, it also faced challenges, including decreased credit sales and loans, a decline in revenue, concerns over net loss rates, and lower net interest income.
Addition of Iconic Brand Partners
Bread Financial celebrated the onboarding of iconic partners such as Hard Rock International, HP, and Saks Fifth Avenue. The company managed to secure seven renewals in 2024, ensuring more than 85% of loans through 2026 and nine out of the top 10 programs through at least 2028. This strategic move strengthens their market presence and reinforces long-term growth.
Improved Capital Levels
The company reported an impressive improvement in capital levels, notably reducing parent-level debt by 50% and achieving a double leverage ratio below 115%. Additionally, the tangible book value per share saw a 7% year-over-year increase, reflecting financial robustness.
Positive Operating Leverage
Bread Financial achieved its goal of positive operating leverage due to disciplined expense management and efficiency gains. This was highlighted by lower expenses than initially forecasted for 2024, showcasing the company’s commitment to operational efficiency.
Strong Partner Growth
The earnings call revealed year-over-year positive credit sales growth in Q4 within sectors like beauty, sporting goods, and retail apparel. There was also a notable improvement in sales among millennials and Gen Z, indicating a successful targeting of key demographic groups.
Decreased Credit Sales and Loans
The company experienced a 7% decrease in credit sales totaling $27 billion and a 1% decrease in average loans to $18.1 billion. This decline is attributed to moderated consumer spending and proactive credit tightening measures.
Revenue Decline
Revenue fell by $451 million or 11% to $3.8 billion, driven by reduced finance charges, late fees, and merchant discount fees. The previous year’s $230 million gain on sale also contributed to the comparative decline.
Net Loss Rate Concerns
There are ongoing concerns regarding Bread Financial’s net loss rate, which was 8.0% in Q4. The company forecasts this rate to remain between 8.0% to 8.2% for 2025, which exceeds its long-term target.
Lower Net Interest Income
The company reported an 8% decline in total net interest income year-over-year, primarily due to a lower loan yield and reduced merchant discount fees.
Forward-Looking Guidance
Looking ahead, Bread Financial anticipates flat average loans with a slight increase in year-end loans for 2025. The company projects total revenue growth in the low single digits and expects a net loss rate between 8.0% to 8.2%. They plan to maintain a normalized effective tax rate of 25% to 26%. Despite macroeconomic uncertainties, Bread Financial remains focused on operational excellence and technological advancements to sustain positive operating leverage.
In conclusion, Bread Financial’s earnings call reflected a dual narrative of optimism and caution. While the company celebrated strategic partnerships and financial improvements, it also acknowledged challenges such as declining credit sales and revenue, and persistently high net loss rates. The forward-looking guidance suggests a cautious yet optimistic approach in navigating future uncertainties.
