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FedEx May Cut Jobs, Add Fewer Stores and Park Planes

Sedona16

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Dec. 17 (Bloomberg) -- FedEx Corp. stunned investors a week ago by slashing its annual profit forecast, sending the stock down the most in 21 years. Job cuts may be next at the shipper, a proxy for the U.S. economy.

With the recession deepening, the second-largest package delivery company must trim labor costs, speed retirement of older jets and halt expansion of its FedEx Office printing shops, said Dan Ortwerth, an Edward Jones & Co. analyst.

The Memphis, Tennessee-based company may say tomorrow in its quarterly earnings report that U.S. express and freight volumes fell at least 10 percent amid the longest U.S. slump in a quarter-century, Ortwerth estimates.

“Even in a best-case scenario, they’re still going to suffer a lot,” said Ortwerth, who is based in St. Louis. “FedEx is a premium services company and a transportation company, and both of those sectors get hit badly in an economy like this.”

He still recommends buying the stock, because he says it is undervalued and package demand will rebound when the economy recovers. FedEx has tumbled 28 percent this year, compared with a 38 percent drop for the Standard & Poor’s 500 Index.
The shares rose 58 cents to $63.97 at 4 p.m. in New York Stock Exchange composite trading.
No Holiday Forecast

FedEx and larger competitor United Parcel Service Inc. both broke with tradition this year and didn’t project peak holiday shipping volumes, saying the soft economy made forecasts too difficult. Higher fuel surcharges and pressure to trim costs have prompted some customers to switch to less-expensive delivery options, FedEx has said.

FedEx’s earnings projection last week of $3.50 to $4.75 a share for the fiscal year ending in May, down from as much as $5.25, suggests “unprecedented” declines in volumes, said David Campbell, a Thompson Davis & Co. analyst in Richmond, Virginia.
“If they’re implying that, they should be doing something with costs,” said Campbell, who also rates FedEx as “buy.”

Profit for the year will be $4.37 a share, according to the average estimate of 16 analysts surveyed by Bloomberg. FedEx may say tomorrow that fiscal second-quarter earnings were $1.58 a share, according to 12 analysts surveyed, compared with $1.54 a year earlier. Spokesman Maury Lane declined to comment.

Cuts Under Way
Express air envelopes and packages account for about 64 percent of FedEx’s total revenue, or $24.4 billion. Many of those items are sent on short notice, curbing the company’s ability to forecast demand.
“FedEx doesn’t have visibility beyond Monday,” said Art Hatfield, a Morgan Keegan Inc. analyst in Memphis who rates the shares as “market perform.”
Tomorrow’s conference call with investors will be “a lot of ‘we don’t know and we’re expecting the worst,’” Ortwerth said.

Chief Financial Officer Alan Graf told investors in September that bonuses and other variable compensation already have been pared, and that flight time for its jet fleet and labor hours were cut “significantly.” FedEx’s global workforce numbers about 290,000 people, including 13,000 contractors.
Last week, FedEx Freight employees were told that 540 jobs would go, and more than 650 jobs were eliminated at the FedEx Office unit. FedEx is closing more than 35 Office retail stores and said in June it would add 70 locations in fiscal 2009, down from 300 the previous year.

Parking Planes
Ortwerth suggested further trims to the payroll and shutting underperforming FedEx Office outlets. FedEx said in June it had a $696 million non-cash charge to write down the value of goodwill from the 2004 Kinko’s acquisition, and changed the chain’s name to FedEx Office.

“FedEx realizes that by taking some pain and continuing to serve the customer, it’s going to pay off in the long term,” Ortwerth said. “I don’t think there’s anything about this downturn that changes their long-term prospects.”

FedEx also should accelerate plans to ground more of its inefficient Boeing Co. 727s beyond the 5 slated for retirement in fiscal 2009 and 40 more over the next 3 years, Ortwerth said. The company has 80 of the three-engine jets in service, averaging 29 years old, according to the Ascend Online Fleets database. FedEx said its fleet totaled 672 planes as of August.
The trick for management is to avoid drastic changes that would hamper the ability to win new business once the economy resumes growing, said Morgan Keegan’s Hatfield.

“You’ve got to be able to just ride it out, and that’s what they can do,” Hatfield said. “They can contain costs on the air side, try to run better operations at their hubs and cut back on white-collar hiring and slow planned spending.”

To contact the reporter on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net.
 
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Max Powers

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So are we talking more pilots out on the street? And the hits just keep on coming. Thanks Bush and all you red necks who supported him.
 

maxblast72

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So are we talking more pilots out on the street? And the hits just keep on coming. Thanks Bush and all you red necks who supported him.
Don't forget to thank the Clinton, the Democratic Congress that has been in control over the last 2 years, greedy Wall Street CEOs, greedy mortgage brokers signing up every Joe Shmoe that thought they could afford a bigger house, greedy and stupid consumers that loaded up on debt to their eyeballs to keep the spending going, and terrorists that have added a security cost to everything we buy including energy (until the last 3 months).

Thank god Bush is leaving so you will have to come up with a new excuse for the world's problems. Cause we all know government can fix everyone's problems.
 

rajflyboy

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US company's need to start thinking more long term. They are too concerned with quarterly profits.

Laying off employee's destroys moral and increases training costs at a later time when you need to re hire these folks (especially pilots).

I seriously doubt that FEDEX will be hurt long term by this economy. They need to ride out the storm and stay strong for when this storm pass's over. They are WAY too worried about SHORT TERM PROFITS.
 

climbhappy

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thanks bush and all you red necks for supporting him

actually it was the hispanic,black and female vote that got him in. males are split down party lines just like this past election..

I would almost say no , you can't blame a president for something cyclical like the economy. But, his policies clearly made this thing worse and no oversight on the wall street stuff. yeah, I'll blame him with you.
 

8vATE

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Don't forget to thank the Clinton, the Democratic Congress that has been in control over the last 2 years, greedy Wall Street CEOs, greedy mortgage brokers signing up every Joe Shmoe that thought they could afford a bigger house, greedy and stupid consumers that loaded up on debt to their eyeballs to keep the spending going, and terrorists that have added a security cost to everything we buy including energy (until the last 3 months).

Thank god Bush is leaving so you will have to come up with a new excuse for the world's problems. Cause we all know government can fix everyone's problems.

AMEN!
You got my vote!
 

8vATE

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So are we talking more pilots out on the street? And the hits just keep on coming. Thanks Bush and all you red necks who supported him.



Another Bush hater... that's fine.

Clinton with his "Fair Housing" revitalization Act (pressuring the Fannies/Freddies) to make housing more affordable had NOTHING to do with our problem!
Yea right...

Where was the Congressional oversight?

Barney Frank..
Chris Dodd...

The amount of arrogance, ignorance, ineptitude and just utter incompetence is ASTOUNDING in Congress.

Yea.... Bush is an easy guy to mock and to point your finger at and to believe he is a fool.

But the American people need to start looking at themselves in the mirror to see who is responsible.

Unfortunately, when you can vote in more people to "take care of you" and give you money... what is the future going to look like?

Big government. More control.. more taxes.
 

pipe

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I love how you twisted the opinion of one analyst to make the thread look like doomsday at FedEx. It never ceases to amaze me that there are so many that don't want to see others do well -- or even o.k.

It is obvious from the way you titled the thread that you derive some warped glee from this guy's opinion.

PIPE
 

StopNTSing

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I love how you twisted the opinion of one analyst to make the thread look like doomsday at FedEx. It never ceases to amaze me that there are so many that don't want to see others do well -- or even o.k.

It is obvious from the way you titled the thread that you derive some warped glee from this guy's opinion.

PIPE

Unless of course we're talking about SWA, then it's feel free to pile on, right Pipe? :laugh:
 

pipe

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Unless of course we're talking about SWA, then it's feel free to pile on, right Pipe? :laugh:

FedEx actually charges a premium for a superior product -- neither concept is part of the WN business plan. When FedEx starts coming into places with predatory pricing and destroying other companies you'll have a point. Until then you don't.

PIPE
 

ExAF

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Wow

FedEx actually charges a premium for a superior product -- neither concept is part of the WN business plan. When FedEx starts coming into places with predatory pricing and destroying other companies you'll have a point. Until then you don't.

PIPE
The man has a point.
 

Sedona16

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I love how you twisted the opinion of one analyst to make the thread look like doomsday at FedEx. It never ceases to amaze me that there are so many that don't want to see others do well -- or even o.k.

It is obvious from the way you titled the thread that you derive some warped glee from this guy's opinion.

PIPE

Sorry it hurt your little feelings. I used the title from the original article almost word from word as reported on Air Transport World smart brief, a daily aviation publication. I thought it was newsworthy and surprised to hear the cargo industry isnt as immune from the downturn as some originally thought. Maybe you should just close your eyes, plug your ears and yell lalalalalalalalalalala for ten minutes. It might make you feel better.

Btw, I didnt add one word of commentary until now, you perceived what you wanted or didnt want to and tried to blame me for the bad news.
 

pipe

fuggedaboutit
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Sorry it hurt your little feelings. I used the title from the original article almost word from word as reported on Air Transport World smart brief, a daily aviation publication. I thought it was newsworthy and surprised to hear the cargo industry isnt as immune from the downturn as some originally thought. Maybe you should just close your eyes, plug your ears and yell lalalalalalalalalalala for ten minutes. It might make you feel better.

Btw, I didnt add one word of commentary until now, you perceived what you wanted or didnt want to and tried to blame me for the bad news.

That is surprising. When people have less and spend less -- there's less stuff to ship. Who knew?

PIPE
 

Sedona16

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Funny guy. What is even funnier is all the cargo trolls rolling around on these boards the past few years since 911 convincing all the pax haulers you got it made....you and UPS are insulated from what the pax guys gotta deal with because "hey no matter what people will just keep sending boxes". I'll admit, I started to buy in to this argument to some degree. It looks like we were both wrong. Having said that, barring some unforseen circumstance I beleive box haulers will be just fine in the end. Your increased number of FE's who were over 60 combined with the age 65 legislation and parking 3 man airplanes has hurt you worse in the short term than some pax carriers purely from a pilot standpoint.
 

say again

I love her ARSE!!!!
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These are the times I wish I owned an alcohol distribution company, or maybe a few fields down in Colombia.
 

skykid

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Having spent several years at a legacy carrier and wishing now I had gotten furloughed 4 years earlier (like the day I got hired) I can't tell you how glad I am to be weathering this downturn at FedEx instead of somewhere else. Mgt is proactive with cost saving ideas, and FedEx is still making money! I count myself as very fortunate.
 

Sedona16

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Having spent several years at a legacy carrier and wishing now I had gotten furloughed 4 years earlier (like the day I got hired) I can't tell you how glad I am to be weathering this downturn at FedEx instead of somewhere else. Mgt is proactive with cost saving ideas, and FedEx is still making money! I count myself as very fortunate.

Yeah I have no doubt Fedex will be around for the long term especially with Fred behing the scenes. One of your freight brothers ("Networ-King", a former Delta guy) who likes to rail on his former Delta peeps from time to time doesnt seem to be very happy at UPS lately. http://forums.flightinfo.com/showthread.php?t=119376 Given time I'm sure both Fedex and UPS will be good pilot wise once we all start losing the age 65 guys in a few years. At least you dont have to worry about going out of business in the iterim.
 

jimcav

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So are we talking more pilots out on the street? And the hits just keep on coming. Thanks Bush and all you red necks who supported him.
Just because you disagree with someone politically does not mean you should resort to name calling. Remember what your boy Obama said,"we can disagree without being disagreeable".
 
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