FedEx to Reduce Capacity as Virus Disrupts Economy -- WSJ
March 18 2020 - 3:02AM
Dow Jones News
By Paul Ziobro
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (March 18, 2020).
FedEx Corp. pulled its financial forecasts and said it would
continue to reduce its delivery capacity, as the coronavirus
pandemic disrupts global trade patterns and economic activity.
The delivery giant withdrew its earnings guidance for the first
time in its 50-year history. It joins several dozen companies from
travel site Expedia Group Inc. to retailer Nordstrom Inc. in
retracting their forecasts.
"The Covid-19 pandemic is having a significant impact around the
world," FedEx Chief Executive Fred Smith said in Tuesday's earnings
release. He said the company is anticipating increased demand for
overseas shipments but is unsure what the global impact is from
tens of millions of households taking measures like quarantining to
reduce the spread and the resulting downdraft in economic growth.
"We will continue to support efforts to combat the pandemic."
Amazon.com Inc. said this week it plans to hire an extra 100,000
employees in the U.S. as millions of people turn to online
deliveries at an unprecedented pace. The e-commerce giant, which no
longer uses FedEx, also said it was taking steps to prioritize
shipments of medical supplies and household staples.
FedEx is also seeing demand pick up in some areas as a result of
the coronavirus, executives said. Flights out of Asia are filling
up as factories and stores across the globe need parts and
inventory. In the U.S., the Ground business has been bolstered by
more people who are avoiding stores and shopping online.
But FedEx executives say the world is changing quickly.
"What we do not know is how the pandemic evolves and what
happens to demand," FedEx Chief Operating Officer Raj Subramaniam
said on Tuesday's earnings call. "The first two weeks of March have
been good but there's no way to project forward what the next few
weeks hold for us."
FedEx's fiscal third-quarter earnings fell by more than half to
$315 million from $739 million last year. Excluding items like
integration expenses and realignment costs, per-share earnings were
$1.41 in the latest period, down from $3.03 last year.
The sharp declines represented the impact from the pandemic, as
well as other business challenges hitting FedEx, like increased
costs from expanding its Ground delivery service and the loss of
Amazon last year as a customer.
Mr. Smith said that the global economy is already being hurt by
trade wars and tariffs but that the pandemic is going to cause
further problems. "You add the coronavirus on top of that and world
GDP growth this year is going to be extremely small," he said.
Total revenue rose 3% to $17.5 billion, as double-digit growth
in FedEx's Ground division, which is bolstered by more people
shopping online during the holiday season and beyond, offset
shrinking revenue in its Express division. The company's revenue
topped analysts' consensus from FactSet, while adjusted earnings
met analysts' expectations.
FedEx shares, up 1% to $96 in aftermarket trading, have taken a
beating during the coronavirus pandemic. Through Tuesday's close,
shares are down more than 42% from their high for the year,
including its largest daily decline on Monday since the 1987 stock
market crash.
Allison Prang contributed to this article.
Write to Paul Ziobro at Paul.Ziobro@wsj.com
(END) Dow Jones Newswires
March 18, 2020 02:47 ET (06:47 GMT)
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