FedEx reports profit fall in first quarter of fiscal year

posted on 18th September 2019 by Justin Burns
FedEx reports profit fall in first quarter of fiscal year

FedEx has reported for the first quarter ending 31 August a profit of $745 million, compared with $835 million a year earlier, as a weakening global macro environment negatively impacted business.

Revenue declined very slightly to $17.05 billion in the first quarter.

FedEx said operating results declined primarily due to weakening global economic conditions, increased costs to expand service offerings and continued mix shift to lower-yielding services. The impact of one fewer operating day and the loss of business from a large customer also hit results.

These factors, the express freight firm said were partially offset by lower variable incentive compensation expenses, revenue growth at FedEx Ground and increased yields at FedEx Freight.

“Our performance continues to be negatively impacted by a weakening global macro environment driven by increasing trade tensions and policy uncertainty,” said Frederick Smith, FedEx chairman and chief executive officer.

“Despite these challenges, we are positioning FedEx to leverage future growth opportunities as we continue the integration of TNT Express, enhance FedEx Ground residential delivery capabilities and modernize the FedEx Express air fleet and hub operations.”

As previously announced, effective 6 January 2020, FedEx Express, FedEx Ground and FedEx Home Delivery shipping rates will increase by an average of 4.9 per cent, while FedEx Freight shipping rates will increase by an average of 5.9 per cent.

FedEx is lowering its fiscal 2020 earnings forecast as the company’s revenue outlook has been reduced due to increased trade tensions and additional weakening of global economic conditions since the company’s initial fiscal 2020 forecast in June.

“FedEx is implementing additional cost-reduction initiatives to mitigate the effects of macroeconomic uncertainty, including post-peak reductions to the global FedEx Express air network to better match capacity with demand,” said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer.

“However, we are continuing to make strategic investments to improve our capabilities and efficiency, which we expect will drive long-term increases in earnings, margins, cash flows and returns.”

FedEx in August severed ties with Amazon by announcing it would be ending its ground shipping contract with the e-commerce giant, after earlier in June saying it would allow its FedEx Express agreement with Amazon to expire without renewal as well.