FedEx Corp withdraws earnings guidance for the first time in 50-year history
Mar 18, 2020: FedEx Corp. said it would continue to reduce its delivery capacity, as the coronavirus pandemic disrupts global trade patterns and economic activity. While reporting its consolidated results for the third quarter ended February 29, FedEx Corp revealed that operating results declined due to weaker global economic conditions including the impact of the coronavirus. Operating results also took a hit on account of higher self-insurance accruals, an unfavourable variable incentive compensation comparison, increased FedEx 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.
These factors were partially offset by the benefits from volume growth at FedEx Ground, an additional operating weekday, increased yields at FedEx Freight and the shifting of Cyber Week into December. The delivery giant withdrew its earnings guidance for the first time in its 50-year history.
“The COVID-19 pandemic is having a significant impact around the world,” said Frederick W. Smith, FedEx Corp. chairman and chief executive officer. “We continue to deliver for our customers and are ready to support increased demand for our 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.”
Last year’s net income included tax benefits of $90 million ($0.34 per diluted share) from the recognition of certain loss carry forwards. This was partially offset by a tax expense of $50 million ($0.19 per diluted share) related to new lower rates in the Netherlands applied to deferred tax balances.
“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., FedEx Corp. executive vice president and chief financial officer. “To mitigate these near-term headwinds and position the company for future earnings growth, we are attacking costs throughout the company by managing capacity, retiring our oldest and least-efficient aircraft, integrating TNT Express, and lowering our residential delivery costs by having FedEx Ground deliver FedEx SmartPost and certain day-definite FedEx Express packages.”