FedEx Braced for a Holiday Crush That Didn't Come
March 21 2017 - 8:14PM
Dow Jones News
By Paul Ziobro
FedEx Corp. said some of its largest retail customers shipped
fewer packages during the holiday season than forecast, after the
delivery giant had ramped up spending and staffing in anticipation
of a crush of deliveries.
"We provided capacity that went unused," FedEx Chief Financial
Officer Alan Graf said on a conference call Tuesday.
The outcome hurt FedEx's bottom line during the fiscal third
quarter ended Feb 28. While revenue surged 18%, helped by higher
rates and more packages shipped, overall margins fell amid a 30%
rise in fuel costs and investments to keep up with e-commerce
growth.
Both FedEx and rival United Parcel Service Inc. are struggling
to keep pace with the dramatic growth of e-commerce. While more
people doing their shopping online is bringing added volume into
their networks, both are spending heavily to build out
package-sorting centers and automating facilities to handle the
extra deliveries more profitably.
Both chains are also eyeing the ambitions of Amazon.com Inc.,
which is grabbing retail share and slowly building its own delivery
network. While that could cut into FedEx's e-commerce business, the
company says that 85% of its operation is business-to-business
deliveries.
"We think we have a not-great risk of being disrupted," FedEx
Chairman and Chief Executive Fred Smith said.
FedEx backed its outlook for the fiscal year, and implied a
healthier fiscal fourth-quarter as the carrier now adjusts fuel
surcharges weekly instead of monthly so it can better respond to
fluctuating costs. The company cut its capital spending outlook for
the year by $300 million to $5.3 billion, as it reduces spending in
its ground business.
FedEx shares rose 2.5% in late trading to $196.70.
Over all, third-quarter profit rose 11% to $562 million, or
$2.07 a share. Excluding integration and restructuring costs tied
to the acquisition of TNT Express, profit fell to $2.35 a share
from $2.51 a share. Revenue rose 18% to $15 billion.
The Memphis-based company said the integration of the Dutch
parcel delivery company TNT Express, acquired last year for $4.8
billion, is progressing smoothly and would add between $1.2 billion
to $1.5 billion to the operating income of its Express division by
fiscal 2020.
--Maria Armental contributed to this article.
Write to Paul Ziobro at Paul.Ziobro@wsj.com
(END) Dow Jones Newswires
March 21, 2017 19:59 ET (23:59 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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