Costco to stop taking American Express

Costco Wholesale Corp will stop accepting American Express Co’s credit cards at U.S. stores from next year, threatening nearly 8 percent of the worldwide annual spending on its cards.

AmEx said Thursday the loss of the contract would hurt earnings for two years, sending its shares down as much as 7 percent and wiping out about $6 billion of market value.

JPMorgan Securities analyst Tien-tsin Huang said the loss of Costco would reduce spending on AmEx cards by about $80 billion a year, including their use at businesses other than Costco’s 468 stores in the United States and Puerto Rico.

AmEx said it expected earnings per share growth in 2015 to be flat to down modestly from 2014 as the company invests aggressively to prepare for the termination of the contract.

The agreement between AmEx and Costco is to end after 16 years on March 31, 2016. Costco warehouses in the United States now accept only American Express cards.

“We were unable to reach terms that would have made economic sense for our company and shareholders,” American Express CEO Kenneth Chenault said in a statement.

Competition in the co-branded card business has intensified in recent years, leading to higher renewal costs, Chenault said in a conference call.

Costco declined to comment on the move, which follows its decision to drop AmEx in Canada last year.

Capital One Financial Corp and MasterCard Inc replaced AmEx as Costco’s card partner in Canada, raising speculation that the companies could also replace AmEx in the United States.