U.S. package delivery company FedEx Corp. has reported a decline in operating results for the third quarter ended February 29, 2020, and has withheld its fiscal 2020 earnings forecast due to the uncertainty caused by the coronavirus pandemic.
FedEx posted revenue of US$17.5 billion in the third quarter, up from $17.0 billion in the same period a year ago. But operating income fell to $411 million from $911 million. Net income dived to $315 million from $739 million and diluted earnings per share sank to $1.20 in the third quarter from $2.80 previously.
“The COVID-19 pandemic is having a significant impact around the world,” said Frederick W. Smith, FedEx chairman and chief executive officer, in a statement.
But he added that they are seeing increased demand for their international express export services due to the significant reductions in intercontinental air capacity.
“While the global economic impact from recent social-distancing mandates is uncertain, we remain well positioned to assist our customers as they work to manage their supply chains and inventories. We will continue to support efforts to combat the pandemic,” he added.
FedEx said operating results declined due to weaker global economic conditions including the impact of the coronavirus, higher self-insurance accruals, an unfavorable variable incentive compensation comparison, increased ground costs from expanded service offerings, the loss of business from a large customer, a continuing mix shift to lower-yielding services and a more competitive pricing environment.
“We are suspending our fiscal 2020 earnings forecast for our consolidated and segment results due to the uncertainty caused by the coronavirus pandemic,” said Alan B. Graf, Jr., group executive vice president and chief financial officer.
To mitigate these near-term headwinds and secure future earnings growth, Graf said the company is reducing costs by managing capacity, retiring its oldest and least efficient aircraft, integrating TNT Express, and lowering its residential delivery costs by having FedEx Ground deliver FedEx SmartPost and certain day-definite FedEx Express packages.
Photo by Obi Onyeador on Unsplash
