Just when everyone thought that the worst was over and
economic revival was just around the corner, courier services firm FedEx
Corporation(NYSE:FDX) has set off alarm bells with its forecast of a worsening
global economy.
In anticipation of the slump ahead, the company has
cut its forecast for its fiscal year ending on May 2013.
Lowering its guidance for the year, the world's No. 2
package delivery company said that it expected to earn between $6.20 and $6.60
per share for the full fiscal year, compared with a previous forecast of $6.90
to $7.40 per share.
There has been a decline in demand for the premium
kind of services offer by FedEx and customers have shifted to cheaper courier
services, which may not be as fast as FedEx but are less costly.
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FedEx, which has seen a dip in demand, has not reacted
fast enough to lower its costs. It said that earnings in the current quarter
would be lower compared to a year earlier.
Shares in the company fell about 2 percent in
premarket trades on Tuesday.
FedEx has already implemented a series of
restructuring measures to streamline its functioning and is expected to take
some more steps.
At its Express unit, which is seeing the maximum
damage, it has reduced the number of flights, undertaken job cuts, and reduced
its fleet size. The Express unit reported a 1 percent rise in revenue in the
first quarter while operating profit fell 28 percent.
For the current quarter, FedEx forecasts earnings of
$1.30 to $1.45 per share, compared with $1.57 per share last year, lagging
analyst forecasts.
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