Credit-card spending data "was far worse than we expected," KeyBanc analyst Anurag Rana said in downgrading Visa Inc., [image-nocss] MasterCard Inc. and Heartland Payment Systems Inc. to neutral from buy. Visa shares declined 7.8% to $45.51 in recent trading, MasterCard shares declined 5.1% to $123.65 and Heartland Payment shares declined 4.3% to $15.68. (See related story about Heartland in this issue of CSP Daily News.)
UBS AG analyst Jason Kupferberg also warned Visa and MasterCard shares were likely to be volatile following the earnings reports of the big banks. But Kupferberg said investors should bear in mind that Visa and MasterCard are more than just U.S. credit-card companies, and that U.S. credit-card volumes likely fell off more dramatically during the fourth quarter than in the rest of the world.
Still, KeyBanc's Rana said MasterCard and Visa were still tied strongly enough to the U.S. economy that the decline in credit spending justified his concern; he estimated that about 60% of Visa's payments volume was in the U.S. during its 2008 fiscal year. Meanwhile, he said that about 41% of MasterCard's volume came from the U.S. in 2008 fiscal year.
MasterCard is scheduled to report its fourth-quarter results, and Visa is scheduled to report results for its fiscal first quarter in early February.
Meanwhile, a recent Nielsen Co. survey predicted that consumers nationwide have been forced to alter their behavior and spending patterns due to the weak economy in 2008. It said "cash will be king," especially at convenience stores. As credit-card companies continue to raise fees on retailers, there is more motivation to offer discounts for shoppers paying cash. C-stores will take the lead on cash discounts, as many already offer lower gasoline prices for cash purchases. As other retail channels offer cash discounts, credit-card companies may get enough pressure to reduce fees for retailers. (Click here to read the full story.)
A related Kraft/CSP Daily News Poll asked, "Are more customers paying cash at your stores recently?" Of the 150 responses, 48% said "about the same as usual"; 22% said "yes, a few more"; more than 21% said "no, fewer customers are paying cash"; and about 9% "yes, a lot more."
And, of course, credit-card fees remain a hot topic in the c-store industry. Another Kraft/CSP Daily News Poll asked, "What single item is at the top of your industry-related 'wish list' for the incoming Obama administration?" The response "gaining traction on credit-card fee regulation" led the choices of the 174 respondents at nearly 37%, followed by "for it to make real strides in achieving energy independence" at more than 26%, "for it to go easy on the tobacco industry" at nearly 15%, "for it to go easy on the oil companies and the petroleum industry" at 8%, "other" at 8% and "none" at nearly 6%.
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