>> The carnage in the retail sector that's humbling giants like Macy's and Sears, reaching outside the industry all the way to Citigroup. With the two department stores struggling to keep customers coming through the doors, that means less swipes for store-branded credit cards. Which you may have guessed by now are managed by Citigroup.
This is big business for the bank, those store credit cards backed by Citigroup's North American Retail Services Unit brought in $1.25 billion in profits last year. Hitting that number this year will be difficult. Both retailers are closing stores in their battle against Amazon and lower-priced competitors. Further putting Citigroups retail card businesses at risk of a cash slow down?
According to ratings at ABC Moody's, likely store closures at Staples and Office Depot. Experts point out consumers can misinterpret store closings for a retailer going out of business, leading some to skip credit payments for stuff they already bought. Resulting in a spike in late payments or no payments at all.
Some of that is already happening, credit losses for Citigroup store-branded partners have gotten bigger for three straight quarters. That hasn't been seen since the financial crisis. But Citi's total credit card business is no where near those dark days. Its direct-to-consumer cards are thriving, and at least one of the store-branded retail cards it backs is doing well.
Home Depot has been immune to Amazon's assault. But unfortunately because of a new deal between the bank and Home Depot, Citigroup is bringing home less of a share of the profits than it used to.