UPDATE 2-Alliance Data says private label unit to drive growth

Thu Jul 19, 2012 11:18am EDT

* Q2 core EPS $2.13 vs est $1.91

* Sees Q3 core EPS $2.18 vs est $2.33

* Sees 2012 rev $2.50 bln vs est $3.56 bln

July 19 (Reuters) - Alliance Data Systems Corp's profit beat estimates as credit card spending rose in its private label services and credit segments, and the company said it expects "significant deals" in the unit to drive growth in 2013.

The company, which provides private-label credit card services to retailers, operates under three segments - LoyaltyOne, Epsilon and Private label services and credit.

The company said last month it would buy $475 million worth of private-label credit card accounts from department store operator Bon-Ton Stores Inc.

"Private Label continued to rip-it with exceptionally strong mid-teens growth in both credit card sales volume and receivables," Chief Executive Ed Heffernan said in a statement.

He expects this growth to continue throughout 2012 and into 2013.

Alliance Data plans to close the Bon-Ton acquisition in July and expects full benefits from the deal to be realized in 2013.

Credit card spending rose 18 percent to $2.87 billion, while charge-offs fell 230 basis points to 4.9 percent.

"After years of decline, credit card spending is increasing again," Heffernan said.

PROFIT FORECAST BELOW ESTIMATES

The company expects third-quarter core earnings of $2.18 per share, on mid single-digit revenue growth.

Analysts on average were expecting core earnings of $2.33 per share, according to Thomson Reuters I/B/E/S.

The company also raised its full-year revenue forecast to $3.50 billion and core earnings to $542 million.

Core earnings grew to $2.13 per share, while revenue grew 17 percent to $866 million, for the second quarter, above estimates of $1.91 per share on revenue of $834.8 million.

Shares of Alliance Data, which has a market value of $6.60 billion, have gained 26 percent since the start of the year. They were up 1 percent at $131.48 in morning trade on Thursday on the New York Stock Exchange.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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