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FedEx 4Q profit drops as economic growth is weak

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By Thomas Olson
Wednesday, June 19, 2013, 12:45 p.m.

The FedEx Ground business in Moon was spared the downsizing that is eliminating about 3,600 jobs at the parent FedEx Corp., which posted a 45 percent drop in quarterly earnings on Wednesday.

The package delivery unit, FedEx Ground, employs nearly 3,000 people locally out of the corporation's total workforce of more than 300,000. It operates three shipping facilities in the Pittsburgh region.

FedEx Corp., based in Memphis, is cutting jobs as a result of a voluntary separation program it announced last October to boost profits. The workers will leave the company by next May.

The “overwhelming majority” of the FedEx employees who accepted the buyout do not work for FedEx Ground, said spokesman Jess Bunn. Nearly all work for international shipping unit FedEx Express or for FedEx Services, which provides marketing, information technology and sales support for the corporation.

“FedEx Ground posted another strong year,” said FedEx Corp. CEO Frederick Smith in a statement. The company's fiscal year ended May 31.

Annual revenue at the Moon-based business increased 10 percent to $10.6 billion, and operating profit rose 1 percent to $1.8 billion. The unit's revenue for the fiscal fourth quarter jumped 12 percent to $2.78 billion, but operating profit declined 6 percent to $464 million.

Results at the parent company were more stressed.

FedEx Corp. earned $303 million, or 95 cents per share, in the fourth quarter, which ended May 31. That's down from $550 million, or $1.73 per share, a year earlier. Severance and other restructuring costs totaled $496 million after taxes. Revenue rose 4 percent to $11.44 billion, just below analysts' forecast of $11.46 billion.

For the full year, earnings fell 23 percent to $1.56 billion, or $4.91 a share. Revenue rose 3.7 percent to $44.3 billion.

Company profits were hurt by “tepid economic growth and customer preference for less costly international shipping services,” Smith said.

To pare costs and boost profits, FedEx Corp. is retiring 10 aircraft and their related engines. The company, the world's largest cargo carrier, wants to cut annual spending by $1.7 billion by 2016.

The company has been dealing with a slump in high-end express-delivery services as customers try to save money by picking cheaper but slower shipping options. FedEx Express plans to further cut delivery capacity between Asia and the United States in July.

FedEx said it expects earnings per share to increase between 7 and 13 percent in the year ending next May 31.

Thomas Olson is a Trib Total Media staff writer. He can be reached at 412-320-7854 or The Associated Press contributed to this report.

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