FedEx Points To Difficult Global Trade For Issues With Express, Buyouts On The Way

People should be expecting some changes to courier international rates from FedEx, as the company’s looking to save costs to compensate for the hits the company has taken from slowdown in global trade.

The Memphis logistics giant reported quarterly earnings of $4.03/share, which is better than what analysts recently estimated, at $3.94/share. From the same quarter in 2017, profits went up from $775 million to $935 million and company revenues went up from $16.3 billion to $17.8 billion.

According to the company, the higher volumes and increased yields helped boost operating income, but European economic weakness have hit their Express package volume, which the company expects to continue.

FedEx Chairman and CEO Fred Smith stated that the company is currently in the midst of another record-setting holiday season, and he salutes their employees, which number around 450,000 worldwide, for providing outstanding customer service. However, he says that, while the US economy remains strong, the international side of the business took a bit of a dive during the same quarter.  He states that the company working to mitigate the impact of this trend with new cost-reduction initiatives.

FedEx downgraded its 2019 fiscal year forecast down to the $12.65 to $13.40/share range from $15.85 to $16.45/share range, not including year-end retirement plan accounting adjustments.

FedEx Chief Marketing and Communications Officer Raj Subramaniam, during an earnings call, says that the company is now past the peak for global economic growth, adding that Asia is starting to see a similar slowdown to the one in Europe.

In the last quarter of 2017, earnings went up by 15%, which FedEx attributed to growth in both e-commerce and global economies as the primary reasons as why financial results improved back then.

CFO Alan B. Graf Jr. says that the company will be focusing on increasing organizational efficiency thanks to the expected slowdown of global trade activity. FedEx will be implementing voluntary buyouts for eligible employees, plus additional methods, like adjusting discretionary spending, and reducing Express’ international network, possibly affecting its courier international rates, in order to mitigate damage.

FedEx didn’t disclose exactly how many employees will be offered buyouts. It currently has around 425,000 employees, with 30,000 of those located in the greater Memphis area. They did, however, state that the vast majority of the employees offered buyouts will be FedEx Express and FedEx Services employees.