American Express wants more credit card spenders

American Express I’ve found that even for wealthy credit card providers, it pays to focus on the highest levels.

The company recently shifted marketing dollars to its revamped Platinum card, which carries an $895 annual fee, and away from its no-fee cash back cards, CEO Stephen Squirre told analysts Friday after the company reported fourth-quarter results.

Doing so helps boost overall spending levels as premium consumers continue to thrive, a tactic that leads to increased fee revenue from premium cards and lower loan defaults, executives said.

“We have the ability…to be really flexible in our marketing investments, and we’ve seen tremendous demand for premium products, especially the Platinum Card,” Squirre said.

“The overall portfolio is slowly getting more premiums [as] He added that the platinum portfolio is growing at a very rapid pace.

AmEx’s shift in strategy is the latest example of the so-called K-shaped U.S. economy, in which wealthy consumers continue to spend freely while others rein in their spending. Data released by the card company shows that demand for high-end products and luxury experiences is accelerating, while purchases in basic categories are rising at a slower pace.

Spending at luxury retailers was up 15% in the quarter, first-class and business airfare purchases were up 9%, and spending at luxury hotels was up 12%, CFO Christophe Lukaelec told CNBC in an interview.

Meanwhile, overall airline and lodging spending rose 3% and 5%, respectively, during the quarter, showing that the wealthiest cardmembers are driving the results.

The suspension helped allay analysts’ concerns that the relaunch of the pricey Platinum card last fall did not go well.

AmEx said Friday that new card accounts reached 2.9 million at the end of the year, a decline from the third quarter and the lowest number in the past five quarters, as the company focused on more profitable card products.

“We are increasingly concerned that the Platinum Card update is not generating a lot of interest,” BTIG analysts led by Vincent Kinetic said, citing new competition from other card issuers and consumer concern over high fees and onerous perks.

While the company does not disclose the total number of card members, including the Platinum Card, Squire told analysts on Friday that “all the metrics we look at point to the fact that this has been a very successful product launch.”

However, AmEx shares fell about 3.5% in midday trading after the company’s results and guidance disappointed some.

EPS of $3.53 was a penny below the consensus estimate, according to LSEG.

The company said this was due in part to higher-than-expected expenses of $14.5 billion, driven by platinum refresh costs.

“If there is a problem, it might be that Q4 clearly shows the cost of Platinum refreshes, but doesn’t show a corresponding rise in new accounts,” Truist analyst Brian Foran wrote in a research note.