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FedEx Hit By Higher Fuel Prices

December 16, 1999

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FDX, the parent company of FedEx says lackluster earnings in its most recent fiscal quarter were due to higher fuel prices and the loss of market share to United Parcel Service.
According to the Wall Street Journal, the company is revamping sales operations and making plans to integrate its Federal Express and RPS brands.
Net income in the company's fiscal second quarter ended Nov. 30 declined 6% to $171 million, or 57 cents per diluted share, from $183 million, or 61 cents a share, a year earlier. Revenue increased 8.6% to $4.57 billion from $4.21 billion.
FDX's chief financial officer, Alan B. Graf, said higher fuel prices cut earnings by $55 million and were the single biggest factor in the quarter's results.
The sales operation at FedEx is being reorganized to focus on increasing the number of boxes -- rather than letters -- shipped overnight.
To help spur sales at its RPS unit, which delivers packages through a ground-based trucking network, FDX also is planning to reposition at least some RPS services under the FedEx flag, according to people familiar with the strategy.
FDX said the operations of FedEx and RPS will remain separate, regardless of how they are branded. But the company realizes that RPS services could be marketed more effectively under the FedEx label, a global icon which the company has spent millions to build.
That decision could be critical to FDX's aspirations to be a major player in delivering goods ordered over the Internet. The company intends to roll out a new home-delivery service next March, which will reach about 50% of the U.S. population. But analysts say that service, which is being developed by the RPS unit, would be more successful under the FedEx brand.

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