FedEx profits slide after startup of a major customer, Amazon

The delivery company reported Tuesday a slight decline in sales and a decline in operating profit of 12% for the quarter ended August 31, compared to the same period last year. Global commercial litigation, rising costs related to the expansion of its delivery services and the "loss of business of a large customer" have likely contributed to this decline, a- he added.

FedEx (FDX) stock fell nearly 10% in after-hours trading.

Amazon (AMZN) previously used FedEx to deliver online orders to consumers. But in recent years, Amazon has become a serious competitor to FedEx, which is building its own distribution network. In June, FedEx announced that it would not renew its contract with Amazon for air cargo services, preferring to focus on other e-commerce companies such as Walmart and Target.

Then, in August, FedEx announced that it would also stop providing ground delivery services to Amazon. FedEx noted that Amazon accounted for only about 1.3% of its revenue in 2018, but the loss of the e-commerce leader's business was a sign of growing competition in the sector logistics.

In Tuesday's statement, FedEx lowered forecasts for its annual results for 2020, citing the loss of this "big customer", global trade tensions and a weakening global economic outlook. The company now expects earnings per share of $ 10 to $ 12. In 2019, FedEx posted earnings per share of $ 2.03 for the full year, a particularly low figure due to its acquisition of the European express delivery company TNT Express. In the previous year, earnings were $ 16.79 per share.

"FedEx is implementing additional cost reduction initiatives to mitigate the effects of macroeconomic uncertainty," said FedEx CFO Alan Graf, Jr.