FedEx CEO blames tariffs, 'bad' politics for lower profit outlook, shares tank
Shares of courier giant FedEx plunged on Wednesday, after the company cut guidance for the coming year due to a number of “bad political choices” weighing on the global economy.
Shares tumbled in midday trading, worsening the 32 percent drop already this year.
CEO Fred Smith said “most” of the challenges the company is dealing with have been “induced” by political decisions.
“Making a bad decision about a new tax, creating tremendously difficult situation with Brexit, the immigration crisis in Germany, the mercantilism and state owned enterprise initiatives in China, the tariffs that the United States put in unilaterally,” he said during the company earnings call. “So you just go down the list and they are all things that have created a macro-economic slowdown.”
A slowdown in Europe is also hurting business. Germany, Europe’s biggest economy, recently contracted and it stock market has fallen into a bear market.
FedEx announced measures on Tuesday to cut costs to make up for weak international shipping – including offering voluntary buyouts to employees.
For the coming year, FedEx now expects to earn as much as $16.20 per share, less than the prior range of $17.20 to $17.80 per share.
On a more optimistic note, Smith added that simple policy changes could turn things around. The FedEx founder has been one of the CEOs that has visited with President Trump at the White House. In the wake of the passage of the tax reform law, Smith – who supported the tax reform – was one of the business leaders who increased pay and doled out bonuses to employees.
Even as its outlook worsens, FedEx said it isn’t worried about emerging competition—specifically from e-commerce giant Amazon.
Executives said that while the e-commerce giant is “a wonderful company,” they do not foresee it ever becoming a competitor.
“We don’t see [Amazon] as a peer competitor,” company leaders told investors. “At this point in time for many reasons, we think it is doubtful that will be the case. We have very strong strategies, well understood by management team, the addressable markets that we deal with are growing. And as we’ve said over and over again, we’ve grown market share and particularly in the sectors we want to grow.”
Amazon currently contracts drivers to deliver its packages, but many believe a broader push could be in the works.