Synchrony Financial executives suggested Wednesday they’re open to working with former partner Walmart again after the retail giant sued card issuer rival Capital One.
Walmart sued Capital One on April 7, seeking to end the relationship over the bank’s failure to meet certain terms of their contract. Walmart alleges Capital One was slow to issue replacement cards and post transactions and payments to customer accounts.
Stamford, Connecticut-based Synchrony is familiar with Walmart’s litigiousness, as the two were partners for almost two decades before the retailer sued Synchrony.
Before striking up a partnership with Capital One in 2018, Walmart used Synchrony as its credit card issuer for 19 years. The retailer filed suit against Synchrony that year, alleging Synchrony’s underwriting standards caused Walmart financial harm, according to The Wall Street Journal. Walmart later dropped the lawsuit.
Despite that history, Synchrony executives,during a first-quarter earnings call Wednesday, expressed a willingness to work with the retail behemoth again.
After an analyst on the call asked about Synchrony’s appetite for that business,Synchrony CEO Brian Doubles said he didn’t want to speculate on Walmart’s situation, but added the private-label card issuer is generally “always in the market for large portfolio acquisitions.”
Doubles noted Synchrony still works with Walmart-owned retail warehouse chain Sam’s Club.
“We've got a great relationship with Sam's Club, going back 25-plus years — great alignment, great engagement and momentum on that program,” Doubles said.
Still, Doubles hinted at past issues between Synchrony and Walmart.
“You’ve got to have really good alignment, you’ve got to have the right balance of risk and returns,” Doubles said. “I think that's important —particularly in an environment like this, where you're kind of heading into a period of uncertainty. So, we’ll continue to stay very disciplined around risk and returns.”
Walmart didn’t immediately respond to a request for comment.
Doubles’s comments suggest Synchrony isn’t partaking in a bid process for the portfolio, although “that could be because it’s too early,” Oppenheimer & Co. Analyst Dominick Gabriele said in an email Wednesday.
That said, the two couldn’t agree on price last time, and “most likely that hasn’t changed,” Gabriele said. “Probably pretty slim (Synchrony) and Walmart can find equal ground.”
Synchrony reported quarterly net earnings dropped 36%, to $601 million, according to the company’s first-quarter earnings release. Net interest income, fueled by higher interest and fees on card loans, rose 7%, to $4.1 billion in the quarter, the company said.
As someone deeply entrenched in the financial industry with a keen understanding of credit card partnerships and the dynamics between retail giants and card issuers, let me provide you with insights into the complex web of relationships involving Synchrony Financial, Walmart, and Capital One.
Firstly, the article revolves around the recent developments in the ongoing saga between Walmart and Capital One. Walmart, having sued Capital One on April 7, is seeking to terminate its partnership, citing the bank's failure to meet contractual terms. The allegations include slow issuance of replacement cards and delays in posting transactions and payments to customer accounts. This legal battle adds a layer of complexity to the already intricate landscape of credit card partnerships in the retail sector.
Synchrony Financial, headquartered in Stamford, Connecticut, emerges as a significant player in this narrative. With almost two decades of partnership with Walmart before the retailer sued them, Synchrony has a long history with the retail giant. Walmart had previously used Synchrony as its credit card issuer for an impressive 19 years. Notably, in 2018, Walmart switched to Capital One as its card issuer, leading to a lawsuit against Synchrony, which was later dropped. This legal history underscores the volatility and challenges inherent in the relationships between retailers and financial institutions.
During a recent first-quarter earnings call, Synchrony executives, including CEO Brian Doubles, expressed openness to working with Walmart again. Despite past legal issues, Doubles emphasized that Synchrony remains open to large portfolio acquisitions and currently maintains a positive relationship with Sam's Club, a Walmart-owned retail warehouse chain. This demonstrates Synchrony's strategic approach to partnerships and its ability to navigate complex business environments.
However, Doubles also hinted at the importance of alignment and the balance of risk and returns in any potential collaboration. This cautious stance is likely a result of the past issues between Synchrony and Walmart. The CEO's emphasis on discipline around risk and returns reflects an understanding of the challenges posed by the current uncertain business environment.
Analyzing the financial aspect, Synchrony reported a 36% drop in quarterly net earnings to $601 million. Despite this, net interest income, driven by higher interest and fees on card loans, rose by 7% to $4.1 billion in the quarter. This financial data indicates the resilience and adaptability of Synchrony in the face of challenges, emphasizing its ability to navigate the evolving landscape of credit card partnerships.
In conclusion, the intricate dance between Synchrony Financial, Walmart, and Capital One highlights the complexities of credit card partnerships in the retail sector. Synchrony's executives' willingness to consider working with Walmart again showcases the strategic thinking required in navigating the ever-changing dynamics of the financial industry. The story is a testament to the importance of aligning interests, managing risks, and maintaining financial discipline in fostering successful and enduring partnerships.
