FedEx posts bigger loss with a gloomy outlook

NEW YORK — FedEx, the nation’s second largest package shipper, lost more money in the last quarter, as consumers and businesses downsized shipments and the company took over $1 billion in one-time charges.

Memphis, Tenn.-based FedEx Corp. also said Wednesday that it expects a rough ride for some time.

“The operating environment for our first two quarters in fiscal 2010 is expected to be extremely difficult,” executive vice president and chief financial officer Alan B. Graf Jr. said.

In April, the company’s Atlanta-based rival UPS Inc. said its first-quarter profit plunged 55 percent. It offered a disappointing second-quarter outlook.

FedEx lost $876 million, or $2.82 per share in the three month period ending in May. the company lost $241 million, or 78 cents per share, a year ago. Excluding one-time charges, earnings were 64 cents per share in the recent quarter.

The company took a $900 million writedown related to the 2004 purchase of Kinko’s — now known as FedEx Office — and $90 million in charges related to a September 2006 acquisition of a trucking company and its affiliates. It also took charges for employee severance and facility cutbacks.

Revenue in the fourth-quarter fell 20 percent to $7.85 billion.

FedEx predicted earnings in the current quarter will drop sharply from a year ago. The company sees a profit of 30 cents to 45 cents per share for the period ending in August, compared with earnings of $1.23 per share a year ago.

Graf said that sluggish manufacturing and another run-up in fuel prices will hold back earnings. On Tuesday the government reported industrial production fell by 1.1 percent in May — for the seventh straight monthly drop. Oil prices have doubled since March on hopes the worst of the global economic slowdown may be over and fuel demand will rise.

FedEx and UPS are viewed as bellwethers of the economy because they transport a wide variety of goods from factories to retailers and consumers.

Fourth-quarter revenue for the FedEx Express unit dropped 25 percent. as the unit moved fewer packages and fuel prices rose. In the freight segment, revenue fell 28 percent. The company’s ground segment did relatively well, with revenue down only about 1 percent from a year ago. That unit was helped by DHL exiting the U.S. domestic package market and from a delivery partnership with the U.S. Postal Service.

FedEx said that international package volumes improved in the fourth-quarter compared to the quarter before. The company hopes that means the global economy slowdown is leveling off.

In a conference call with analysts, Chief Financial Officer Alan Graf said the company hasn’t yet decided whether it will have to layoff more workers or make further cut backs because of economic conditions.

“That is a question that’s going to play out during the year,” Graf said. “We have hiring and wage freezes, basically across the board. We have suspended our 401(k) contributions. If the economy turns up and we start to see the growth that we think we will get, we will start to repair those reductions.”

Executives continued to urge action against a bill in Congress that would make it easier for FedEx workers to unionize. The company warns the legislation would mean potential interruptions in package delivery if strikes occurred at its facilities once unions organized there.

FedEx has a fleet of about 670 aircraft and more than 80,000 vehicles. Currently, only its pilots are unionized.

For the full fiscal year, FedEx posted a profit of $3.76 per share, compared with $5.83 a year ago. Excluding charges in both years, earnings were 31 cents per share in fiscal 2009 and $3.60 in fiscal 2008. Revenue fell 6 percent to $35.5 billion.

FedEx shares fell 72 cents, or 1.4 percent, to close at $50.70 Wednesday.