FedEx cuts 2020 profit, cites 'significant challenges'

[BENGALURU] FedEx Corp on Tuesday issued its second warning on fiscal 2020 profit after quarterly earnings fell sharply on lackluster global trade and the end of its relationship with Amazon.com, the world's top online retailer.

Shares fell 6.5 per cent in after-hours trade to US$152.58 after FedEx also said the late arrival of Thanksgiving shifted revenue from the Cyber Week holiday delivery surge into December, hurting results in its quarter ended Nov 30.

FedEx's adjusted net income fell almost 39 per cent to US$660 million, or US$2.51 per share, for the fiscal second quarter, missing analysts' average estimate for a profit of US$2.76 a share, according to IBES data from Refinitiv.

Revenue was down 2.8 per cent to US$17.3 billion.

In September, FedEx lowered its earnings forecast for the year ending May 31, 2020, to US$11 to US$13 per share. On Tuesday, it cut that to US$10.25 to US$11.50 per share, citing missed revenue targets in all transportation segments and higher costs from residential delivery services.

The shortened peak holiday season has dialed up the pressure on package delivery firms. Thus far, FedEx appears to be lagging main rival United Parcel Service Inc in on-time deliveries.

"Fiscal 2020 is a year of continued significant challenges and changes for FedEx, particularly in the quarter just ended due to the compressed shipping season," Frederick Smith, FedEx's founder and chief executive, said in a statement.

Sriram Sridhar, CEO of LateShipment.com, tracks last-mile deliveries and said data culled from his clients indicated that FedEx is lagging UPS's performance in large cities like Los Angeles, Seattle, Boston and New York.

Up to 15 per cent of FedEx ground packages are delayed in some of the worst affected areas, "which is pretty high for ground shipments this time of the year," said Mr Sridhar, who forecast that by the end of the season FedEx could have 1 per cent to 2 per cent more delays than UPS.

Amazon this week temporarily blocked third-party sellers from using the FedEx ground delivery network to handle Prime shipments as the online retailer strives to hit accelerated delivery deadlines this holiday season.

REUTERS