FedEx offers cautious 2020 outlook as CEO slams US, China on trade

NEW YORK — FedEx warned Tuesday that its fiscal 2020 earnings outlook remains clouded by trade war uncertainty as the company’s chief executive criticised the Trump administration’s lurch towards protectionism.

Overall the company is projecting 2020 diluted earnings-per-share to be down by a “mid-single-digit” percentage point compared with the 2019 level.

FedEx expects higher operating income in fiscal 2020 from its domestic package and freight shipping services as growing e-commerce activity fuels higher revenues.

But operating income is expected to be dented at FedEx Express, its international shipping division, in part because of trade uncertainty. 

“We’ve been very disappointed over the last few years with the assumptions that we made on the growth of international trade, particularly with the Trump administration”, Chief Executive Fred Smith said on a conference call with financial analysts.

“The United States policy since 1934... was to expand international trade and now we have a huge dispute with China where the US has basically become protectionist, defined as ‘I’ll make everything I need in my own borders.”

Smith, long an outspoken advocate of free trade, also took issue with China’s policy on trade, which he described as “mercantilist”.

US President Donald Trump and Chinese leader Xi Jinping are expected to meet at the G-20 gathering in Japan later this week, an occasion that investors are hoping will bring the two countries closer to agreement after months of tariffs, countermeasures and threats.

Smith said the company remained committed to operating in China and “completely dedicated” to complying with Chinese laws. 

He said the company has experienced more audits “to some degree” at its Guangzhou hub in the wake of the US-China dispute.

FedEx again apologised over delivery problems involving Chinese telecommunications giant Huawei following a US crackdown on the company that Trump has linked to the US-China trade war.

Smith said the company’s newly-filed lawsuit against the Commerce Department over export restrictions was not directly related to the Huawei case but was due to a broader set of government actions that are “opaque” and put too much onus on delivery companies.

On Monday, FedEx sued the US Commerce Department over export restrictions it said impose an “impossible burden” on delivery firms and asked a US District Court to block enforcement of the measures.

FedEx says the US rules makes shippers liable for packages that could violate the restrictions, even if the shipper has no prior knowledge of the problem.

FedEx reported a net loss of $2 billion for the quarter ending May 31, compared with $1.1 billion in profits in the year-ago period. 

The company cited lower international revenues and $316 million in costs associated with a voluntary employee buyouts as factors in the loss.