FedEx’s first quarter results reveal a decline in net income and the company has also announced it is lowering its fiscal 2020 earnings forecast.
In the first quarter that ended August 31, FedEx recorded net income of $745 million down from $835 million in the same period last year. Revenue was almost static at $17.05 billion ($17,052 million last year) operating profit was $977 million (down from $ 1,071 million last year).
Frederick W. Smith, FedEx Corp. chairman and chief executive officer commented: “Our performance continues to be negatively impacted by a weakening global macro environment driven by increasing trade tensions and policy uncertainty.”
The company said the results also reflect increased FedEx Ground costs and August’s loss of FedEx Ground business from “a large customer.” The large customer referred to is likely to be Amazon.
“Despite these challenges,” says Smith, “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.”
The company says 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 negatively impacted results. These factors were partially offset by lower variable incentive compensation expenses, revenue growth at FedEx Ground and increased yields at FedEx Freight.
As previously announced, effective January 6, 2020, FedEx Express, FedEx Ground and FedEx Home Delivery shipping rates will increase by an average of 4.9%, while FedEx Freight shipping rates will increase by an average of 5.9%. Details related to these and additional changes to rates and surcharges are available at fedex.com/rates2020.
“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.”
Source: Post and Parcel