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FedEx profits slip after booting major customer Amazon

Losing Amazon as a customer is weighing on FedEx's bottom line.The delivery company on Tuesday...

Posted: Sep 18, 2019 7:32 AM

Losing Amazon as a customer is weighing on FedEx's bottom line.

The delivery company on Tuesday posted a slight revenue decline and a 12% drop in operating income for the three months ending August 31, compared to the same period last year. Contributing to that decline, the company said, were global trade disputes, increased costs related to the expansion of its delivery services and the "loss of business from a large customer," a likely reference to Amazon.

FedEx's stock fell nearly 10% in after-hours trading.

Amazon used FedEx previously to deliver online orders to consumers. But Amazon has in recent years become a serious competitor to FedEx as it builds out its own distribution network. In June, FedEx said it would not renew its contract with Amazon for air cargo services, saying it would focus instead on other e-commerce companies such as Walmart and Target.

Then in August, FedEx said it would also stop providing ground delivery services to Amazon. FedEx has noted that Amazon made up only around 1.3% of its revenue in 2018, but losing the business of the e-commerce leader was a sign of growing competition in the logistics business.

In its Tuesday statement, FedEx lowered the forecast for its full-year 2020 earnings, citing the loss of that "large customer," as well as global trade tensions and a weakening global economic outlook. The company now expects earnings per share of $10 to $12. In 2019, FedEx posted full year earnings per share of $2.03, a particularly low number owing to its acquisition of European express delivery company TNT Express. The prior year, earnings were $16.79 per share.

"FedEx is implementing additional cost-reduction initiatives to mitigate the effects of macroeconomic uncertainty," FedEx Chief Financial Officer Alan Graf, Jr. said in a statement, adding that the company will make some reductions to its Express air network to cut costs.

The company is also hiking shipping rates again — starting on January 6, 2020. The cost to ship with FedEx Express, FedEx Ground and FedEx Home Delivery will increase by an average of 4.9%, and FedEx Freight shipping rates will increase an average of 5.9%.

Oregon Coronavirus Cases

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Cases: 193732

Reported Deaths: 2572
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Multnomah38352591
Washington25592233
Marion22026306
Clackamas17440214
Lane13007148
Jackson10862139
Deschutes896274
Umatilla820284
Linn492969
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Polk375752
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Gilliam631
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Wheeler321
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California Coronavirus Cases

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Cases: 3764405

Reported Deaths: 62573
CountyCasesDeaths
Los Angeles123645624067
Riverside2994554594
San Bernardino2967824715
San Diego2785913729
Orange2709835026
Santa Clara1190642096
Kern1091771374
Sacramento1048401686
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San Joaquin732201391
Contra Costa68741805
Stanislaus621421061
Tulare49654839
Monterey43613383
San Mateo42038568
San Francisco36720544
Santa Barbara34337456
Solano32953252
Merced31898460
Sonoma30035320
Imperial28443726
Kings22989246
Placer22679292
San Luis Obispo21308260
Madera16462242
Santa Cruz16264207
Marin14056227
Yolo13910210
Shasta12152226
Butte12026199
El Dorado10168112
Napa987082
Sutter9433112
Yuba626847
San Benito606563
Lassen570624
Tehama557262
Nevada474275
Tuolumne413166
Mendocino410149
Humboldt404641
Amador365847
Lake347643
Glenn239125
Colusa223416
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Calaveras212954
Inyo142838
Del Norte13938
Mono12844
Plumas7106
Modoc4994
Mariposa4487
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