FedEx announce annual profitability improvements

By Freddie Pierce
FedEx are hoping to improve their annual profitability by $1.7 billion over the next three years, through a series of profitability measures including...

FedEx are hoping to improve their annual profitability by $1.7 billion over the next three years, through a series of profitability measures including cost reductions at FedEx Express and FedEx Services.

The company, which reduced its profit outlook last month has suffered due to increased use of slower and cheaper freight methods, resulting in FedEx’s Express air freight division being used less.

In yesterday's keynote speech to FedEx Corp.’s 2012 Investors and Lenders Meeting, Frederick W. Smith, FedEx chairman, president and chief executive officer said the company intended to increase its dividends in years to come.

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Smith said FedEx has many cost reduction activities underway and cited an improved information-technology function as one reason FedEx will be able to meet its goal of reducing costs.

He cited cost reductions in selling, general and administrative (SG&A) expenses spread throughout the enterprise -- but particularly in FedEx Services and FedEx Express -- and improved information-technology function as additional reasons FedEx will be able to meet its goal of reducing costs.

“Our overall strategy is closely tied to effective yield management,” Smith said. “The key is striking the right balance between volume growth and yield improvements. With slow economic growth, however, the cost reduction programs we will describe tomorrow are also essential to achieve our financial goals.”

New measures proposed that a significant proportion of the benefits will be achieved by 2015, and do not include ongoing base profit improvements at FedEx Ground and FedEx freight.

FedEx reaffirms its outlook for fiscal 2013 of $6.20 to $6.60 per diluted share, and second quarter earnings of $1.30 to $1.45 per diluted share. This guidance assumes the current outlook for fuel prices. The outlook does not include any costs or benefits related to the voluntary buyout program announced in August and which will be implemented in the second half of fiscal 2013.

In addition to these targets, FedEx also announced the retirement of David F Rebholz, president and chief executive officer of FedEx Ground, who will take leave of the company by May 31st, 2013. Rebholz, who will be 60 at the time of this retirement, has led FedEx Ground since 2007 and also serves on the Strategic Management Committee of FedEx Corp.

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