FedEx says profit up 126%, but warns of weak economy
FedEx more than doubled its profit in its third quarter, thanks to a record holiday season. But the cheery results were dampened by the delivery company’s lukewarm outlook for the economy as well as a $3-million payout it will make to settle federal hiring-discrimination charges.
First, the good news: FedEx’s income reached $521 million, up 126% from the same quarter a year ago. That’s $1.55 per diluted share from 81 cents a share, excluding one-time items. Revenue also improved, increasing 9% to $10.6 billion.
Christmas-time customers kept the company busy with a boom in online shopping. During the period, FedEx set a record for shipments, with 17 million packages sent globally.
After the company’s FedEx Express branch increased its rates to compensate for rising fuel costs, revenue per package soared 8%. However, volume slumped 4% as consumers switched to the company’s ground service.
Less glowy: FedEx said it is not optimistic about the economy going forward, expecting “moderate, but below-trend growth” in the U.S. and worldwide. The company predicted that domestic growth for the year will be 2.1%, below economists’ expectations of 2.3%. FedEx’s forecast for 2013 is also gloomier than most.
The company told analysts Thursday that “a mild recession in the eurozone” is coming this year, along with risky movements in the global oil markets.
Also Thursday, the Labor Department said that FedEx subsidiaries FedEx Ground and FedEx SmartPost will pay $3 million to settle federal charges that the companies discriminated against thousands of entry-level job-seekers based on their race or gender.
It’s the largest settlement in the history of the department’s Office of Federal Contract Compliance Programs, which looked at compliance reviews spanning seven years. The money will be paid as back wages and interest to nearly 22,000 applicants who investigators say FedEx turned down for positions at 23 facilities in 15 states.
Without admitting guilt, Memphis, Tenn.-based FedEx said it agreed to the settlement only to avoid future legal fees. The company has promised to offer jobs to 1,703 plaintiffs as positions become available.
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