FedEx trims outlook, says company will hire 55,000 for peak season

The Commercial Appeal (Memphis, Tenn.)

MEMPHIS, Tenn. FedEx trimmed its full-year profit outlook Wednesday but said it expects to hire more than 55,000 seasonal workers to help handle another record holiday shipping peak.

The Memphis-based company lopped 20 cents off its earnings forecast for the year that began June 1. The decrease, less than 2 percent, was attributed to weaker less-than-truckload industry demand and higher than expected insurance reserves and operating costs at FedEx Ground.

A peak season forecast won't come out until October, but the company is bullish, despite predictions of modest economic growth in the U.S. and globally.

"Customers are requesting more capacity, not less," said Mike Glenn, executive vice president, market development and corporate communications. "We view that as a good sign, and that's why we think we're well positioned for another record peak."

The company hired about 50,000 seasonal workers last year for a peak season that saw about 290 million packages moved between Black Friday and Christmas Eve, including 22.6 million on the busiest day Dec. 15.

Rival UPS on Tuesday announced plans to hire 90,000 to 95,000 seasonal workers, about the same as last year.

FedEx officials discussed preparations for peak season and other matters with analysts during a quarterly earnings conference to report a 7 percent increase in profits from a year earlier.

Earnings were $2.42 a share for the June-August quarter, slightly below analysts' expectations of $2.44 a share but ahead of last year's $2.26 a share, or $2.12 a share on an adjusted basis.

The full-year earnings range, which stood at $10.60 to $11.10 in June, was lowered to $10.40 to $10.90, before year-end adjustments due to pension accounting rules.

"FedEx Corp. is performing solidly given weaker-than-expected economic conditions, especially in manufacturing and global trade," said Frederick W. Smith, the company's chairman, president and chief executive officer.

"Our profit improvement program is on track and delivering impressive results, and I am very confident FedEx is well positioned to deliver value for shareowners, customers and team members in fiscal 2016 and beyond." The program, announced in 2012, seeks to increase profits at FedEx Express by $1.6 billion a year by next year.

Alan B. Graf Jr., chief financial officer, called Wednesday's results at Express "incredible" considering revenue was down significantly. Express' operating income increased $545 million as revenues fell to $6.59 billion from $6.86 billion. "That's only possible because of our cost management," he said.

Graf said the profit outlook assumes gains from productivity and aircraft fleet modernization and has built in higher costs from a proposed new pilot contract.

The Air Line Pilots Association FedEx master executive council has recommended ratification of the pilot contract that would bring a 10 percent pay increase this year and raise pay about 26 percent over six years. A vote is scheduled for Sept. 28 through Oct. 20.

"In our outlook going forward is the pilot contract, which we think is fair and balanced for the pilots, their families, the company, the shareholders," Graf said. "As you know we're expecting to continue to grow our earnings, our cash flow and our returns. Nothing's changed in that regard," Graf said.

FedEx stock was down 3.6 percent to $148.41 in morning trading.



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