FedEx Profit Dives 75 Percent

FedEx earnings plunged in the company’s fiscal third quarter as a result of the global recession. The Memphis, Tenn.-based carrier said it would slash capacity and employment rolls to reduce costs and weather the downturn for the long term.

FedEx earned $97 million in the quarter ending Feb. 28, down 75 percent from $393 million a year earlier. Revenue dropped 14 percent to $8.1 billion from $9.4 billion.

"Our financial performance was sharply lower during the quarter due to the global recession," Chairman, President and Chief Executive Frederick W. Smith said in a statement. "While we are gaining market share in all of our transportation segments, the downturn in our industry and the severity and expected duration of the recession require that we take additional actions."

In the next quarter, FedEx said it plans to take a charge of approximately $100 million to account for capacity cuts that are expected to save $1 billion over the following year.

Fedex Freight, the company’s less-than-truckload freight division, suffering from excess capacity and a highly competitive pricing market, posted a loss of $59 million on revenue of $914 million. That compares to a profit of $46 million on revenue of $1.16 billion in the same period a year ago.

The loss “reflects the extraordinary decline in demand for freight services, the continued competitive pricing environment, costs related to the consolidation of our freight regional offices and severance charges from personnel reductions,” the company said. Those factors were partially offset by lower incentive pay and savings from job cuts that were put in place late last year and earlier this year.

LTL average daily shipments decreased 13 percent year over year due to slower market share gains. Yield declined 7 percent due to lower fuel surcharges and increasing competition for less freight business.

FedEx said it will continue to take out heavy freight capacity and continue to cut jobs and reduce employee pay.