LOS ANGELES – Delivery company FedEx cut its full-year revenue forecast and reported quarterly profit that fell far short of analysts’ targets as it battles for business in what is shaping up to be a weak holiday season.
The company’s shares tumbled 8.1 per cent in extended trading on Dec 19 after the announcement.
The results also dragged down shares of rival United Parcel Service (UPS) 2.6 per cent.
FedEx said adjusted earnings for the quarter that ended Nov 30 jumped 23 per cent to US$1.01 billion (S$1.34 billion), or US$3.99 per diluted share.
That result, however, fell 19 US cents per share short of analysts estimate, according to London Stock Exchange Group data.
The holiday shipping season that runs from late November through the end of December is typically the best quarter for delivery companies because volumes can double on the busiest days.
The results from FedEx add to data suggesting that 2023’s holiday “peak” is lacklustre as consumers grapple with inflation and higher costs for housing, food and other necessities.
Operating income grew at FedEx’s Ground division known for delivering packages from Walmart and other shippers during the quarter.
However, that measure declined at its biggest, air-based Express unit, due a year-on-year decline in US Postal Service volume, a shift to less profitable services and other factors – even as some analysts expected improvements.
“We expect revenue will continue to be pressured by volatile macroeconomic conditions negatively affecting customer demand for our services across our transportation companies” for the remainder of the fiscal year that ends May 31, the company said in a regulatory filing.
FedEx now expects a low single-digit percentage decline in revenue from 2022, compared with its prior forecast of roughly flat results.
Retailers and other customers have had the most success in years winning delivery rate reductions as FedEx and UPS fight for every package they need to keep their trucks and planes running efficiently.
FedEx poached UPS customers ahead of the Aug 1 expiration of the contract covering that rival’s 340,000 United Brotherhood of Teamsters employees.
UPS has fought to win back that business, including paying the early termination fees for customers who switched to FedEx during the talks, shipping consultants told Reuters.
Nevertheless, FedEx said it would continue to shelter profits as it continues to slash costs and combine its separate Express and Ground delivery units. REUTERS
