Why Alliance Data Systems Stock Plunged Today

What happened

Shares of Alliance Data Systems (NYSE: ADS) have plunged today, down by 15% as of 11:45 a.m. EDT, after the company reported third-quarter earnings results. This was the first full quarter under Melisa Miller, who was named CEO in June.

What happened

Revenue in Q3 was roughly flat at $1.44 billion, a tad bit light compared to the consensus estimate of $1.45 billion in sales. Adjusted earnings per share came in at $5.05, missing the $5.21 per share in adjusted profits that analysts were expecting. Hands pulling a generic loyalty card out of a purple wallet

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The company, which manages third-party loyalty programs and branded credit cards, is also implementing an expense reduction program that it expects will generate over $100 million in incremental annualized savings. Alliance Data Systems will lay off around 300 workers in its card services segment, which brought in over 80% of revenue during the quarter, as part of that program.

Now what

"We continue to build on our foundation for a return to earnings growth, and we are laser-focused on streamlining our operating model," Miller said in a statement. "This includes reducing our cost structure, which we expect will result in significant savings while continuing to deliver differentiated solutions to the marketplace."

In terms of guidance, Alliance Data Systems cut its full-year outlook for adjusted earnings per share to a range of $16.75 to $17.00, down from a prior forecast of $19.50 to $19.75. The company attributed the reduction to "prime rate changes, an adjustment to the value of certain held-for-sale credit card receivable portfolios, and lower average receivables."

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Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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