FedEx aims to improve its annual profits by $1.7 billion over the next three years by cuttingcosts at FedEx Express with fewer planes and employees in response to changing customer demand for
express services and through other measures.The company yesterday announced programmes targeting an annual profitability improvement of $1.7billion during the next three years, with a significant portion of the benefits planned to beachieved by fiscal 2015. These profit improvement initiatives do not include ongoing base profitimprovements at FedEx Ground and FedEx Freight, the group said.
Fred Smith, FedEx chairman, president and chief executive officer, said in a keynote speech toFedEx Corp.’s 2012 Investors and Lenders Meeting that a significant portion of the profitabilityimprovement would come from cost reductions at FedEx Express and FedEx Services. He added that theprofit improvement initiatives, along with the combined strength of FedEx Ground and FedEx Freight,would put FedEx on track to achieving its financial goals.
“We are revamping the Express cost structure through a combination of cost reductions,efficiency improvements, and service repositioning,” he told investors at an evening event. Furtherdetails of the profit improvement initiatives were due to be unveiled on Wednesday.
Smith said FedEx has many cost reduction activities underway and cited an improvedinformation-technology function as one reason FedEx will be able to meet its goal of reducingcosts. He cited cost reductions in selling, general and administrative (SG&A) expenses spreadthroughout the enterprise — but particularly in FedEx Services and FedEx Express — and improvedinformation-technology function as additional reasons FedEx will be able to meet its goal ofreducing costs.
“Our overall strategy is closely tied to effective yield management,” Smith said. “The key isstriking the right balance between volume growth and yield improvements. With slow economic growth,however, the cost reduction programs we will describe tomorrow are also essential to achieve ourfinancial goals.”
Looking ahead, Smith stressed: “We are confident we will deliver the performance to ensure thenear- and long-term success of FedEx. And, we believe we can do this even in low-growthenvironments for global trade and within the major economies.”
FedEx also reaffirmed its outlook for fiscal 2013 of $6.20 to $6.60 per diluted share, andsecond quarter earnings of $1.30 to $1.45 per diluted share, excluding costs or benefits related tothe voluntary buyout program due to be implemented in the second half of fiscal 2013. The companyexpects thousands of staff to take voluntary redundancy but has not yet put firm figures on thestaff reduction plan.
FedEx announced that David Rebholz, president and chief executive officer of FedEx Ground, wouldretire on May 31, 2013. “Dave has done a tremendous job at FedEx Ground,” Smith said. “Under hisleadership, FedEx Ground has differentiated itself with industry-leading speed and outstandingservice. FedEx Ground has grown rapidly and delivered incredible results during the past severalyears, and it is well positioned to continue that growth in the years ahead.”
