FedEx cited weak global economic conditions and the loss of business from a key customer in the second-quarter causing the delivery giant to miss Wall Street’s expectations on Tuesday, one day after a report that e-commerce giant Amazon had escalated its clash with the shipping firm.
The Memphis-based company said its weaker-than-expected results were attributable to “weak global economic conditions, increased FedEx Ground costs from expanded service offerings, the loss of business from a large customer, a continuing mix shift to lower-yielding services and a more competitive pricing environment.”
FedEx reduced its full-year profit guidance to account for the poor results. Shares fell more than six percent in after-hours trading.
“Fiscal 2020 is a year of continued significant challenges and changes for FedEx, particularly in the quarter just ended due to the compressed shipping season,” FedEx chairman and CEO Frederick Smith said in a statement.
FedEx reported quarterly revenue of $17.3 billion, falling short of a projected $17.58 billion according to Refinitiv data. Adjusted earnings per share were $2.51, also missing Wall Street’s expectations.
The company now expects to post adjusted earnings per share of $10.25 to $11.50, down from an earlier estimate of $11 to $13 per share.
While FedEx did not reference Amazon by name, the company’s relationship with the e-commerce giant has deteriorated in recent months. Amazon has banned sellers on its third-party marketplace from using FedEx shipping services to fulfill orders for its Prime subscription service, the Wall Street Journal reported on Monday.
The ban will remain in place “until the delivery performance of these ship methods improves,” Amazon said in an email to merchants. The e-commerce giant has made heavy investments to boost its own shipping services in recent years.
FedEx criticized the decision in a statement to FOX Business earlier Tuesday, noting that the move “affects a very small number of shippers” but “limits the options for those small businesses on some of the highest-demand shipping days in history and may compromise their ability to meet customer demands.”
FedEx announced in August that it would end ground shipping services for Amazon. That announcement came one month after FedEx said it would allow its contract with Amazon for air shipping to expire.