FedEx Profits Plummet as Consumers Seek Cheaper Options

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fedex earnings fuel costs economic bellweather shipping parcel service
Michael Penn/AP
By DAVID KOENIG

DALLAS -- FedEx Corp.'s fourth-quarter profit fell 45 percent as international customers traded down to less-expensive delivery options.

Excluding charges, the results still beat Wall Street expectations. But the company's forecast for the next 12 months was shy of Wall Street forecasts and shares fell in premarket trading.

The world's second-largest package delivery company said Wednesday that it earned $303 million, or 95 cents a share, in the fourth quarter ended May 31. That's down from $550 million, or $1.73 a share, a year ago.

FedEx (FDX) said that excluding restructuring costs and an aircraft write-down, it would have earned $2.13 a share, which beat analyst forecasts of $1.96 a share in adjusted earnings.


The company is trying to cut annual spending by $1.7 billion by 2016. The steps include buyouts intended to reduce the work force by at least 10 percent by May 2014.

FedEx said Wednesday that about 3,600 employees who applied for a buyout will leave the company. Of those, 40 percent left on May 31.

Severance and other restructuring costs totaled $496 million, or 98 cents a share, after taxes. The company also took a write-down of $100 million, or 20 cents a share, as it retired 10 airplanes during the quarter.

For the fiscal year that started June 1, the company forecast that adjusted earnings will grow between 7 percent and 13 percent. That would suggest a range of $6.67 to $7.04 a share. Analysts surveyed by FactSet were expecting $7.28 a share in the new year.

Fourth-quarter revenue rose 4 percent to $11.44 billion, just below analyst forecasts of $11.46 billion.

The shares fell 54 cents to $98.94 in premarket trading. Through Tuesday, they had gained 8.5 percent so far in 2013.

Chairman and CEO Fred Smith said the company's ground-services business remained strong and margins improved in the freight business during the fourth quarter.

"These positive developments did not fully offset tepid economic growth and customer preference for less costly international shipping services," Smith said in a statement issued by the company.

FedEx Express plans to further cut delivery capacity between Asia and the United States in July.

FedEx delivers shipments from businesses to consumers and other companies. Because its customers span so many industries, it's often seen as an economic bellwether.

The Memphis, Tenn.-based company has been dealing with a slump in high-end express-delivery services as customers try to save money by picking cheaper but slower shipping options.


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36 Comments

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JoyzHaven

I only have one thing to say about Fedex if you have a problem and call them on the phone they jump to help you with it !

June 20 2013 at 1:21 AM Report abuse rate up rate down Reply
suealiaim

you mean like the UNITED STATES POST OFFICE?!!??
lol. glad to hear it.

June 20 2013 at 12:02 AM Report abuse rate up rate down Reply
pal2867

youd be suprised.alot of people love online shopping and shipping is usually free.paid by the shipper.

June 19 2013 at 9:58 PM Report abuse rate up rate down Reply
mgg0428

Shipping ground over air....I'm sure UPS is probably having the same issue. People just can't afford to spend any more than absolutely necessary.

June 19 2013 at 8:53 PM Report abuse +1 rate up rate down Reply
sun1045

Fedex pricing is out of control. A simple fedex letter regular overnight adds a delivery charge along with a list of add-ons. Over $40! We are using USPS now even with the wait in lines...

June 19 2013 at 8:06 PM Report abuse +3 rate up rate down Reply
1 reply to sun1045's comment
Brian

Well, guell what? You are still using FedEx because the USPS is our biggest customer. In fact USPS freight is the main reason we still have a dayside sort at MEM.

June 19 2013 at 9:03 PM Report abuse +1 rate up rate down Reply
2 replies to Brian's comment
filucy

Actually its the other way around. USPS is cheaper for overnight and many of the fed ex flat envelopes I get aredelivered b my mail carrier. I get a couple a week and have yet to see an actual fed ex person in the 5 or so years this has been going on.

June 19 2013 at 9:59 PM Report abuse -1 rate up rate down
Brian

Fedex has been shipping USPS mail since it first was awarded the contract in 2001. Packages are dilivered to local post offices, not to the end recipient.

June 19 2013 at 10:22 PM Report abuse +2 rate up rate down
Brian

Name me another company that will actually pay you back for the sick days you don't take?

June 19 2013 at 7:36 PM Report abuse -1 rate up rate down Reply
2 replies to Brian's comment
no1imac

DHL you a-hole!

June 19 2013 at 10:35 PM Report abuse rate up rate down Reply
1 reply to no1imac's comment
Brian

I wish you the best retirement.

June 19 2013 at 10:39 PM Report abuse rate up rate down
suealiaim

almost everyone i've worked for.

June 20 2013 at 12:03 AM Report abuse rate up rate down Reply
wlh1923

Hey I'll settle for a company, any company that won't leave after hours delivery of packages sitting outside on the front porch entrance of my office on a Friday or Saturday so that they can be stolen over the weekend DESPITE MY INSTRUCTIONS TO THE CONTRARY. Any takers?

June 19 2013 at 7:31 PM Report abuse +1 rate up rate down Reply
Alan

With the purchase of Kinkos, FX now has an unmanageable cost structure. They are doomed.

June 19 2013 at 6:50 PM Report abuse rate up rate down Reply
bj the dj

Greed, Greed, Greedier.

June 19 2013 at 6:47 PM Report abuse +1 rate up rate down Reply
mariodinky661

You have NO compassion!!! people work hard and should be treated properly. Your comments are vial

June 19 2013 at 4:36 PM Report abuse +1 rate up rate down Reply