Fedex News Update: Cuts to be Made
Fedex News Update- Sales have slowed down dramatically in the last year or so, with the economy not helping. As a result capacity cuts have been made.
Fedex has been suffering as a result of the slow moving global economy. It has just been reported that Fedex will therefore be making even more capacity cuts, and therefore will only make slight profitability gains in the next coming year.
Fedex News Update: Fedex acts upon sluggish sales
‘FedEx has said over the past year that it is suffering from customers’ growing preference for slower, lower-margin ground transport instead of its premium air express services. It is also suffering from the general excess capacity in air cargo worldwide.
The company said it would further cut its capacity between Asia and the US in July. It announced that on June 3 that it was immediately retiring 10 aircraft and speeding up the withdrawal of a further 76 as it sought to save costs.
The company projected growth in adjusted earnings per share – which excludes various one-off charges – of between 7 and 13 per cent for the coming year, assuming US gross domestic product growth of 2.3 per cent and world GDP growth of 2.7 per cent.
Alan Graf, chief financial officer, said the pace of profitability improvement would be “moderate” in the coming year and would then accelerate the following year.
“Our profit improvement programme is progressing, but we continue to see the effects of customers selecting lower-rate international services,” Mr Graf said.
For the full year, group-wide net income fell 23 per cent to $1.56bn on revenues up 4 per cent to $44.3bn. Full-year earnings per share fell 23 per cent to $4.91.
Adjusted earnings per share – the company’s preferred measure, which excludes reorganisation costs and aircraft impairment charges – were $6.23, just above the $6 to $6.20 range that the company had projected.
Operating income at FedEx Ground – which has gained business at the expense of air – declined 6 per cent to $464m in the quarter, on revenue up 12 per cent to $2.54bn.
Fred Smith, chief executive, said that although “near-term challenges” remained, the company was confident it would achieve long-term profitable growth.
FedEx’s shares fell 0.98 per cent in pre-market trading to $99.48.’
So Fedex are having to adjust to the changes in customer preferences of different methods, and in doing so hoping to make up for the loss in profits they have been suffering recently. In the current volatile climate of the global economy it is needless to say going to be an uphill battle, but Fedex seem confident that in the long run they will be able to hold on and pull through.
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