Alliance Data's Latest Deal To Boost BrandLoyalty Business

LoyaltyOne, the Europe-based BrandLoyalty business of Alliance Data Systems Corporation (NYSE:ADS) , recently inked a deal with Lowes Foods to supervise a promotional campaign in 75 Lowes Foods stores in North Carolina, South Carolina and Virginia.

Lowes Foods is a major supermarket chain and grocery retailer in the U.S. with about 100 stores and is owned by Alex Lee, Inc. Hickory, NC-based Alex Lee Inc. is a diversified holding company with two primary food distribution and retail operating companies with operations in North and South Carolina, Virginia, West Virginia, Georgia, Alabama, Florida, Tennessee, Ohio, Pennsylvania and Kentucky.

Pursuant to the deal, customers spending $10 at Lowes Foods stores will get one stamp – either traditional or virtual – at checkout, goods toward VIVO kitchen knives, knife blocks and cutting boards till Feb 26, 2017.

BrandLoyalty has already gained popularity in Canada (the program was introduced in Canada in late 2014). The program is already in place at Sobeys, Metro and IGA. The latest initiative is expected to help the program spread across North America. Alliance Data believes that BrandLoyalty will eventually be expanded beyond America to Europe, Asia and Africa.

Philip Spanton, CEO of BrandLoyalty said, “As BrandLoyalty continues to identify and penetrate high-potential markets such as the United States, strategic decisions like our recent appointment of Jill Blanchard as president, BrandLoyalty USA, will strengthen our approach in the highly competitive grocery sector." Spanton believes such strategic steps should help the company achieve its growth targets.

Going forward, the company intends to sign deals that would help it generate annualized revenues of $75–$80 million. Notably, BrandLoyalty remains well poised to deliver mid-teens top line and adjusted EBITDA growth. In fact, short-term loyalty programs and expansion into new markets of South Africa and New Zealand boosted second-quarter 2016 results.

Alliance Data carries a Zacks Rank #4 (Sell). However, we expect such prudent initiatives like the mentioned above will induce analysts to raise their estimates, in turn, leading to a possible rank upgrade.

Stocks to Consider

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Berwyn, PA-based JetPay Corporation provides debit and credit card processing, payroll, human capital management and card services to businesses and their employees in the U.S. The company sports a Zacks Rank #1 (Strong Buy).

Purchase, NY-based MasterCard is a leading global payment solutions company that provides an array of services in support of the credit, debit, mobile, web-based and contactless payments, and other related electronic payment programs to financial institutions and other entities. The Zacks Consensus Estimate increased 0.8% for 2016 and by 0.9% for 2017 over the last 60 days. The company carries Zacks Rank #2 (Buy).

San Francisco, CA-based Visa Inc. operates retail electronic payments network worldwide. The Zacks Consensus Estimate for 2016 remained unchanged over the last 60 days, while the same increased by a cent for 2017. The company carries Zacks Rank #2.

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