US bellwether FedEx warns on outlook

FedEx, the parcels and freight delivery company which has become a bellwether of the global economy, stoked fears of a slowdown with disappointing results yesterday and a warning about poor profits in the coming months.

The downbeat statement came despite the company's boast that it had just had its busiest day ever, shipping 9.8 million packages on Monday night to fulfil orders for last-minute Christmas presents from internet shoppers.

Earnings statements from FedEx have become one of the surest ways to take the economic temperature, and Fred Smith, founder and chief executive, admitted that the outlook for the current three-month period was mixed.

"FedEx has a unique economic perspective as a facilitator of global commerce," he said. "As we look ahead see the following: one, the steady performance of a healthy global economy, led by continued strong growth in Asia; two, somewhat slower growth in the US economy, related to adjustments in the housing and manufacturing sectors; three, increasing online sales leading the retail sector this holiday season."

FedEx shares were down 3 per cent in morning trading, as Wall Street digested news that the current quarter - the third of FedEx's financial year, and its busiest period - would produce earnings well below forecasts. The poor outlook increased economists' concerns that consumer spending over Christmas may not live up to hopes and may not be enough to pep up an economy that is already sluggish because of a weaker manufacturing industry.

The company also dashed hopes that it might increase its earnings guidance for the full year, but insisted it was not lowering that guidance and still expected a strong increase in profit. The dip in the third quarter is partly down to extra pay for its pilots and because of a delay in imposing a surcharge on customers to cover higher fuel costs.

"We believe FedEx is beginning to see the impact of a slowing economy and as such, management is tempering expectations for the second half of the year," said Art Hatfield, an analyst at Morgan Keegan.

Earnings for the second quarter, which ended 30 November, increased to $511m from $471m last year, FedEx said. Growth was led by the business-to-consumer parcels shipping business, reflecting the increased amount of shopping now done online. The average number of parcels delivered daily by FedEx is estimated at about 6 million.