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Synchrony gains longtime Alliance Data client as private-label card wars persist


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Synchrony gains longtime Alliance Data client as private-label card wars persist

Even as a steady stream of headlines discuss the challenges facing retailers as consumer preferences evolve, credit card companies continue to face off for the right to issue private-label and co-branded products in their names.

The April 11 announcement by Crate & Barrel Holdings Inc. that it had selected Synchrony Financial as its new "strategic provider of consumer financing" represents the latest example of a retailer moving from one card issuer to another after many years of partnership. Subsidiaries of Alliance Data Systems Corp. have issued private-label cards on Crate & Barrel's behalf for the past 15 years.

The existing Crate & Barrel Credit Card is issued by Alliance Data's Comenity Bank. The private-label product can be used for purchases and to earn and redeem rewards at Crate & Barrel and the CB2 retail concept. The amount of receivables associated with the existing card was not disclosed.

Synchrony will become the issuer of the private-label card later in 2018, and it will also introduce a new "dual-card," or a co-branded card that can be used by holders anywhere MasterCard is accepted.

Crate & Barrel said it had been seeking a partner that would provide expertise in consumer financing as well as digital tools to enhance the customer experience. Synchrony said the partnership will offer the retailer access to "some of the best data analysts and industry experts in the world" to help grow its business.

When Crate & Barrel chose Alliance Data in September 2002 to provide private-label card services under an agreement with a six-year term, the retailer cited the card issuer's "strong retail heritage and excellent customer service." The parties renewed their agreement in 2008 and again in 2012.

A variety of factors, including competition among issuers and differences in capabilities, have led retailers large and small to shift private-label and co-branded card issuers in recent years. Costco Wholesale Corp.'s shift of its card-issuing partnership to Citigroup Inc. from American Express Co. in 2016 is arguably the most prominent example of such a transition.

Synchrony said in its most recent annual report that it extended program agreements with a number of its retail partners in 2017, including Belk Inc. and Men's Wearhouse. It also launched a host of new programs with retailers, an airline and automakers. Certain credit card portfolios that were sold, have not been renewed, or expire in 2018 constituted less than 1% of the company's 2017 retail card interest and fees on loans.

"We're constantly in that mode of looking at ways to renew and extend contracts," said Synchrony President and CEO Margaret Keane during an appearance at an investor conference in March. "I think we renewed 20 relationships in 2017. So we have a decent track record."

Alliance Data executives said during a January conference call that they believed the nearly 15% growth the company's card services business achieved in average receivables in 2017 represented a good annual target going forward. For 2018, the company said it expected business associated with recently added partners to more than offset any drag from retailer bankruptcies or unsuccessful renewals.

Executives emphasized in March investor conference appearances that a variety of factors, such as getting existing cardholders to spend more and adding new programs, drive Alliance Data's growth in balances, not just opening new accounts.

And while Alliance Data may stand to lose the Crate & Barrel partnership, it has also won new business. It added certain credit card receivables and associated accounts of Signet Jewelers Ltd., a purchase it valued at $945.6 million in cash. More recently, it announced the launch of a new private-label card for retailer Lucky Brand LLC.