FedEx 2Q Profit Improves; Will Cut Salaries, Costs
FedEx Corp. said Thursday its fiscal second-quarter profit rose 3%, but it cited difficult economic conditions and said it would trim senior executives’ salaries and set a hiring freeze.
Net income for the quarter ended Nov. 30 rose to $493 million, or $1.58 a share, from $479 million, or $1.54, a year earlier, matching revised company expectations released last week. Revenue rose 1% to $9.54 billion.
Operating income at less-than-truckload unit FedEx Freight plunged 59% to $32 million, while revenue slipped 3% to $1.2 billion. LTL shipments fell 2%.
Operating income at the FedEx Ground segment rose 23% to $212 million, while revenue rose 5% to $1.79 billion.
FedEx Express’ operating income rose 2% to $540 million, while revenue gained 1% to $6.1 billion.
FedEx is “increasingly being challenged by some of the worst economic conditions in the company’s 35-year operating history,” Chief Executive Officer Frederick Smith said in a statement.
Smith will take a 20% pay cut Jan. 1, while other top executives will take reductions 7.5% and 10%. Remaining U.S. salaried exempt personnel will take a 5% pay reduction.
FedEx also said it will suspend its company matching contributions for employees’ 401(k) retirement plans for a minimum of one year, effective Feb. 1.
The cuts will reduce expenses by $200 million in fiscal 2009 and about $600 million in fiscal 2010, the company said.
FedEx affirmed its fiscal 2009 outlook, released last week, of $3.50 to $4.75 per share, which was down from a previous estimate of $4.75 to $5.25 per share. Its fiscal year ends May 31.
FedEx Corp. is ranked No. 2 on the Transport Topics 100 listing of U.S. and Canadian for-hire carriers.
