- The Washington Times - Thursday, March 19, 2009

NEW YORK (AP) - FedEx Corp. said Thursday it plans to cut more jobs and trim wages again, as the company reported its fiscal third-quarter profit tumbled 75 percent on severe weakness in the global economy.

The Memphis, Tenn.-based company, often seen as a bellwether for the U.S. economy, said it earned $97 million, or 31 cents per share, compared with $393 million, or $1.26 a year earlier.

Revenue fell 14 percent to $8.14 billion, from $9.44 billion.

Analysts polled by Thomson Reuters expected profit of 46 cents per share on revenue of $8.65 billion.

“Our financial performance was sharply lower during the quarter due to the global recession,” Chairman, President and Chief Executive Frederick W. Smith said in a statement. “While we are gaining market share in all of our transportation segments, the downturn in our industry and the severity and expected duration of the recession require that we take additional actions.”

FedEx Express segment sales fell 18 percent to $5.05 billion in the third-quarter, as weak package volume offset the benefit of higher prices. Unit operating income plunged 89 percent to $45 million. The segment has been hit hard as consumers choose less expensive and slower options to ship packages and documents.

The delivery company’s ground segment, which benefited from the sharp scale back of rival DHL and a delivery deal with the U.S. Postal Service, saw operating income rise 15 percent to $196 million. Revenue rose 4 percent to $1.79 billion.

To further reduce costs, FedEx plans to cut more jobs _ although it didn’t say how many. It also plans to scale back some workers’ hours and wages and trim air and truck capacity. The company said it will not shrink its delivery network in any area.

Three months ago, the company announced broad-based cost cuts including a 20 percent pay cut for CEO Smith, a 7.5 to 10 percent cut for other executives and a 5 percent cut for thousands of others. The company froze retirement plan contributions for a year, among other cost-saving measures.

FedEx will take a charge of about $100 million in its fiscal fourth-quarter for the changes, excluding any writedowns on the value of assets. FedEx expects the cutbacks to save about $1 billion in the next fiscal year.

The company expects fourth-quarter earnings of 25 to 50 cents per share, compared with a loss of 78 cents per share a year ago, which was mostly due to a huge one-time charge related to its Kinko’s acquisition. Excluding charges related to cost reductions in the fourth-quarter, the company predicts an adjusted profit of 45 to 70 cents per share.

In a conference call with analysts, the company insisted that its proposed cost cuts _ and possibly additional ones to come _ will help offset sluggish demand.

“I think that what we are showing by the cost reductions we had already taken and the ones that we are about to take, we have a lot more flexibility and variability in our cost structure than most people give us credit for,” Chief Financial Officer Alan Graf said.

The biggest part of the cost cuts will come in FedEx Express, according to Dave Bronczek, the unit’s chief executive.

“(Express) is all around the world…Asia, Europe, here in the United States. So we have a lot of levers to pull - We have a lot of initiatives under way, and we are moving forward on all of those initiatives, he said.”

FedEx shares rose $2.25, or 5.1 percent, to $45.25 in morning trading.

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