Economic weakness knocked down FedEx Corp.'s fiscal fourth-quarter net earnings by 55 percent over last year, the express package shipper reported yesterday.
FedEx also announced spending cuts and a freeze on most hiring, and it issued an earnings warning for the fiscal 2002 first quarter. FedEx's fourth quarter ended May 31.
FedEx reported the following consolidated results for the fourth quarter:
• Revenue of $5.12 billion, up 6 percent from $4.85 billion in the year-ago quarter.
• Operating income of $223 million, down 48 percent from $426 million a year ago.
•Net income of $113 million, down 54 percent from last year's $245 million.
For the full fiscal year, FedEx also reported that earnings were down 14 percent from last year. Revenue of $19.6 billion was up 8 percent from $18.3 billion the previous year; operating income was down 12 percent; and net income was down 15 percent.
“Continuing weak economic conditions, particularly in the hi-tech and durable goods sectors, sharply reduced demand for our express services,” said Alan B. Graf Jr., executive vice president and chief financial officer at FedEx. “U.S. domestic average daily volume at FedEx Express declined 6 percent year over year for the fourth quarter. Additionally, the growth rate of FedEx International Priority shipments slowed to 2 percent.”
FedEx Ground average daily package volume grew 7 percent, however, largely because of growth in FedEx Home Delivery and because shippers shifted some of their packages from FedEx Express to FedEx Ground.
Nevertheless, the company is implementing a number of revenue-enhancement initiatives and cost-reduction programs designed to provide long-term revenue and profit growth and to lower costs to match near-term revenue levels.
These initiatives include the nationwide placement of up to 10,000 FedEx drop boxes outside U.S. post offices, which began the week of June 18. In addition, FedEx Express is on schedule to begin airport-to-airport transportation of Priority, Express and First-Class mail for the U.S. Postal Service on Aug. 27.
FedEx Express is reconfiguring its network and will no longer offer a Sunday delivery option for FedEx Priority Overnight service, effective Aug. 27.
On the expenses side, Fedex said it has implemented several cost-reduction programs, including substantially reducing bonus incentive compensation related to profitability, a freeze on most hiring and a reduction in discretionary expenses at all operating companies.
Furthermore, capital spending has been reduced by deferring aircraft deliveries and by reducing, deferring or eliminating various other projects. These actions allowed FedEx to have a positive cash flow for fiscal 2001, excluding the acquisition of American Freightways.
