cut significantly in profit forecast for the year when faced with higher costs of expanding services, lower revenue from cutting ties with
and a worsening financial backdrop, by sending shares in the delivery company crashing 10% in afternoon trading.
Memphis, Tenn., The company expects earnings per share to fall between 16% and 29% in the current fiscal year, compared with an expectation of a mid-single percentage decline issued in June. FedEx also lowered its revenue outlook.
The profit forecast comes after the company had an 11% decline in fiscal surplus in the first quarter driven by weakness in the Express unit, which delivers jet packages and is hampered by global trade disruption.
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Meanwhile, FedEx & # 39; s Ground Unit, where revenue is growing largely due to multiple e-commerce packages, uses a lot of transportation costs and equipment rental equipment to keep up with that demand.
said it takes more cost cuts to try to offset the weaker environment, including retirement aircraft and ground support by others after the holiday shopping season.
"The global macro economy is continuing to soften, and we are taking steps to reduce capacity," FedEx CEO
it said on Tuesday's earnings.
One of the challenges for FedEx's business is the lack of a trade agreement with China, which has reduced the international movement of goods. Smith said the company initially expected a trade-off when it entered the current fiscal year. "We were hoping for a trade and some kind of return to normalcy, and it hasn't happened," he said.
For the first quarter ended August 31
Revenue fell slightly to $ 17.05 billion.
Analysts polled by FactSet expected earnings of $ 3.15 per share and $ 17.06 billion in sales.
for the fiscal year ending in May, it is expected to be between $ 11 and $ 13 per share before marking for market accounting adjustments and integration expenses.
Last year, FedEx posted adjusted earnings of $ 15.52 per share.
The weaker prospects come as shippers and transporters are given the opportunity for the holiday season, when planning and upgrading will be put to the test as the number of packet flows increases.
It also comes as FedEx is in the midst of a major shake-up in the delivery market while demand for e-commerce shipments is increasing.
It will soon begin delivering parcels seven days a week throughout the year rather than just during the holidays, and will bring in its own network of almost all of the two million parcels it once delivered to the U.S. Postal Service for delivery to doorstep. These additional costs outweigh the FedEx & # 39; s main line.
FedEx will also try to expand its e-commerce business without providing packages for the largest online player in the United States, Amazon.com. FedEx ended its two major shipbuilding contracts with Amazon in recent months, bringing in about $ 900 million in annual revenue. Instead, FedEx aligns with retailers like
, as well as other online businesses competing with Amazon. FedEx recently signed on
Dick & # 39; s Sporting Goods
as a customer, for example, to deliver the reseller's online orders.
FedEx continues to raise prices to offset the higher costs associated with all online home orders. Next year, it plans to raise prices by an average of 4.9% on packages shipped through the Express and Ground networks, while imposing a 5.9% increase on shipping.
Despite the weakness of the Express division, FedEx continues to spend a lot on modernizing the air fleet and some processing plants.
Write to Paul Ziobro at Paul.Ziobro@wsj.com
Corrections and Reinforcements
FedEx's fiscal first quarter a year ago was $ 835 million. An earlier version of this article said it was $ 8.35 million.
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