Fuel Prices and Weak Economy Lead to Disappointing Fourth Quarter Loss for FedEx

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Discussion Overview

The thread discusses the implications of FedEx's recent financial losses and rising fuel prices on shipping costs, particularly in relation to Pampered Chef's shipping practices. Participants express their concerns and speculations about potential increases in shipping rates and the impact on their business operations.

Discussion Character

  • Opinion-based
  • Anecdotal
  • Debate/contested

Main Points Raised

  • One participant speculates that shipping prices will likely increase following the financial news from FedEx.
  • Another participant expresses shock if shipping prices do not rise due to rising gas costs.
  • Several users mention curiosity about whether FedEx will maintain a flat rate or switch to a percentage-based shipping cost.
  • One participant notes that shipping costs could be higher for smaller orders compared to larger ones.
  • Another participant shares their experience that the sales receipts are being replaced, possibly in response to shipping cost changes.
  • One participant recalls that shipping costs have historically changed with the seasons.
  • Another participant emphasizes that shipping costs will rise due to the overall economic situation and fuel prices.
  • One participant mentions that the decision to switch back to UPS is unlikely due to past experiences with rising prices.
  • Another participant discusses the contractual relationship between Pampered Chef and FedEx, suggesting that price increases are not immediate due to contract terms.
  • One participant expresses a desire for weight-based or size-based shipping costs rather than a flat rate or percentage of purchase.

Areas of Agreement / Disagreement

Views differ regarding the certainty of shipping price increases, with some participants expressing strong beliefs that increases are inevitable, while others discuss the contractual factors that may delay such changes.

Contextual Notes

Participants share personal experiences and opinions regarding shipping practices, pricing, and the impact of external economic factors on their business operations.

Who May Find This Useful

Consultants interested in understanding the potential impacts of FedEx's financial situation on their shipping costs and practices may find this discussion relevant.

chefsteph07
chefsteph07
Messages
3,199
FedEx swings to 4Q loss; guidance disappoints
Wednesday June 18, 9:34 am ET
FedEx swings to loss 4th-quarter and issues forecast well below Wall Street expectations


MEMPHIS, Tenn. (AP) -- FedEx Corp. reported a fourth-quarter loss Wednesday that missed Wall Street expectations and it offered a gloomy outlook for its shipping business that showed how much higher fuel prices are eating into profits.
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Considered a bellwether for the broader U.S. economy, the FedEx earnings forecast fell well below Wall Street expectations, and its shares fell 3 percent, or $2.59, to $81.74 at the open of trade.

FedEx sees 2009 earnings of $4.75 to $5.25 per share. Wall Street had predicted $5.92 per share. The package delivery company expects to earn 80 cents to $1 per share in the first-quarter. Analysts forecast $1.27 per share.

The international package shipper posted a fourth-quarter loss of 78 cents a share, or $241 million, compared with a profit of $610 million, or $1.96 per share, for the same period last year. Excluding one-time charges, FedEx earned $1.45 per share.

Revenue rose 8 percent to $9.87 billion from $9.15 billion a year earlier.

Analysts polled by Thomson Financial expected $1.47 per share on revenue of $9.6 billion.

"Record high fuel prices and the weak U.S. economy dampened volume growth and substantially affected our bottom line ... We will continue to reduce expenses to match volume and revenue expectations," FedEx chairman Frederick W. Smith said in a statement.

Fourth-quarter earnings included a one-time charge of $891 million for the expected costs of renaming the company's office service and copying division from FedEx Kinko's to FedEx Office.

FedEx had predicted fourth-quarter earnings of $1.45 to $1.50 a share. That projection was lowered from earlier company guidance of $1.60 to $1.80 a share, due largely to rising fuel costs.
 
What do you wanna bet our shipping price will be going up after NC?
 
I'll be shocked if they don't.
 
It's inevitible what with the rising costs of gas ... I am curious to see if they stick with a flat rate or go to a 10% of your purchase thing...
 
dannyzmom said:
What do you wanna bet our shipping price will be going up after NC?
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I'm guessing that's why our sales receipts are being replaced for next selling season.
 
chefjeanine said:
I'm guessing that's why our sales receipts are being replaced for next selling season.
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Yup - that's what I took it to mean as well...
 
ok so lets guess - how much will shipping be $4.50 maybe?? Still a great deal compared to other DS companies - well - its only 22 days till wave 1 - maybe we will find out then
 
PamperedDor said:
ok so lets guess - how much will shipping be $4.50 maybe?? Still a great deal compared to other DS companies - well - its only 22 days till wave 1 - maybe we will find out then
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I always thought that until I did the math on small orders. If someone orders less than $40 they are paying more than 10% with our $4 shipping. If they order more than $40 they are getting a deal though.

I gave my thoughts on what I think would work on another thread about this.
 
we always change the receipts with the seasons did I miss something???
 
Teresa Lynn said:
we always change the receipts with the seasons

did I miss something???
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There would not appear to be any need to change this season. . .these new write-in receipts have no dates on them.
 
no but it seems like they keep switching the format up I want my old itemized ones back!!!
 
Teresa Lynn said:
no but it seems like they keep switching the format up I want my old itemized ones back!!!
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I'm right there with you on that one . . . just so much easier to get "wish list" products with the itemized forms. That means I can contact people when a Host special might really appeal to them.
 
I think no matter what company we end up using (fedex-Ups) , shipping costs will be rising this next season! It's totally inevitable with soaring gas prices!
 
I doubt we'll be switching back to UPS anytime soon. Rich Hlava, director of operations at HO spoke at the Spring 3-2-1 training and said that they left UPS because UPS didn't believe PC would, and kept raising their prices. Had we stayed with PC, the season we switched (to FE) we would have had $5 or $5.50 shipping. Even with a rate increase at FE, I don't think that HO is going to give UPS the satisfaction of going back.
 
ChefAnn How do you know everything????? We can always count on you!!!
 
Well, just saw this thread. HO wouldn't increase shipping prices just because FedEx has a loss. FedEx can't randomly increase prices on a contract. Depending on the contractual period between HO and PC, it may be a long time before they renew and they are fine where they are at - it will be FedEx loss not PC's. ...and PC has some bargaining power...FedEx would not want to lose a big contract during this time.
 
janetupnorth said:
Well, just saw this thread. HO wouldn't increase shipping prices just because FedEx has a loss. FedEx can't randomly increase prices on a contract. Depending on the contractual period between HO and PC, it may be a long time before they renew and they are fine where they are at - it will be FedEx loss not PC's. ...and PC has some bargaining power...FedEx would not want to lose a big contract during this time.
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God Bless Janet - always the voice of reason!
I love ya man!!!!!!:love:
Now...if only I could carry you in my pocket so you could talk me down when I am having anxiety attacks - LOL
 
  • Thread starter
  • #18
janetupnorth said:
Well, just saw this thread. HO wouldn't increase shipping prices just because FedEx has a loss. FedEx can't randomly increase prices on a contract. Depending on the contractual period between HO and PC, it may be a long time before they renew and they are fine where they are at - it will be FedEx loss not PC's. ...and PC has some bargaining power...FedEx would not want to lose a big contract during this time.
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How long do companies usually contract a shipping company?
I think this will be PC's second or third year w/ FE.
 
PC switched in mid-January 2007 to FE.
 
dannyzmom said:
It's inevitible what with the rising costs of gas ... I am curious to see if they stick with a flat rate or go to a 10% of your purchase thing...
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I really hate the x% of your purchase shipping costs. I know I'm heading into dream world, but I would love to see some sort of weight based shipping or box size based shipping... After all, when I want to ship most things with FE, the shipping box size and final weight are factors in the costs...
 
but that would be impossible to calculate at a show
 
chefsteph07 said:
How long do companies usually contract a shipping company?
I think this will be PC's second or third year w/ FE.
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Sorry, I was stuck at work last night. Haven't gotten to the bottom of the thread to see if this was answered.Rate contracts are annual. So, if we started in January 2007 with then, renewal would be January 2008 and there would be no changes until January 2009. If there was a change then, you wouldn't see it on our end most likely until spring selling season. But like I said, in times like these, large shippers actually have some bargaining power because the big shippers are still competing for business.ETA: Negotiations on a January contract would not be happening already. Too many factors can change between now and then. Now if it was October, then I'd say differently. (All assuming Ann is right with January which she most likely is!!!!)
 
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dannyzmom said:
God Bless Janet - always the voice of reason!
I love ya man!!!!!!:love:
Now...if only I could carry you in my pocket so you could talk me down when I am having anxiety attacks - LOL
Click to expand...

:blushing: Yeah, I'm always logical...sometimes a character flaw, sometimes good. But I always have to logically find the right solution...

On the carrying me in your pocket, yeah right, I couldn't get into your petite little jeans much less your pocket! :p Besides, do you REALLY want me as the voice in your head? :rolleyes:
 
janetupnorth said:
Sorry, I was stuck at work last night. Haven't gotten to the bottom of the thread to see if this was answered.

Rate contracts are annual. So, if we started in January 2007 with then, renewal would be January 2008 and there would be no changes until January 2009. If there was a change then, you wouldn't see it on our end most likely until spring selling season. But like I said, in times like these, large shippers actually have some bargaining power because the big shippers are still competing for business.
Click to expand...

ETA: Negotiations on a January contract would not be happening already. Too many factors can change between now and then. Now if it was October, then I'd say differently. (All assuming Ann is right with January which she most likely is!!!!)
 
janetupnorth said:
Sorry, I was stuck at work last night. Haven't gotten to the bottom of the thread to see if this was answered.

Rate contracts are annual. So, if we started in January 2007 with then, renewal would be January 2008 and there would be no changes until January 2009. If there was a change then, you wouldn't see it on our end most likely until spring selling season. But like I said, in times like these, large shippers actually have some bargaining power because the big shippers are still competing for business.


ETA: Negotiations on a January contract would not be happening already. Too many factors can change between now and then. Now if it was October, then I'd say differently. (All assuming Ann is right with January which she most likely is!!!!)
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So, you are saying that there won't be a change in our shipping charges from Fed-Ex?

I'm thinking there could still be an increase in price....because there has also been a price increase in all of the packaging materials.....but I hope there won't be.

Funny thing happened yesterday though....I had a guest at my show Tuesday night being VERY vocal about our shipping charges, and how outrageous they are - I told her I couldn't understand that - we have some of the most reasonable rates in direct sales....well, yesterday, she called me (!) to apologize - she had been looking at the direct shipping charges, not the show shipping rate!:eek: And - she booked a show!
 
ChefBeckyD said:
So, you are saying that there won't be a change in our shipping charges from Fed-Ex?

I'm thinking there could still be an increase in price....because there has also been a price increase in all of the packaging materials.....but I hope there won't be.

Funny thing happened yesterday though....I had a guest at my show Tuesday night being VERY vocal about our shipping charges, and how outrageous they are - I told her I couldn't understand that - we have some of the most reasonable rates in direct sales....well, yesterday, she called me (!) to apologize - she had been looking at the direct shipping charges, not the show shipping rate!:eek: And - she booked a show!
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FedEx can adjust some surcharges, but USUALLY not the contractural rates within the period. Most companies are very good at adjusting other factors to not affect their shipping.

Hey, they may prove me wrong, but I highly doubt it. If you are worried and want to know for sure, call HO and put an inquiry in.

Love your story about that guest and booking a show!!!! I'm glad she ate crow well. You must have served it nicely within your 30 minute chicken show.
 
Teresa Lynn said:
but that would be impossible to calculate at a show
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Yeah, I know... but I was in my dream world last night and all was fair in love and war!
 

Frequently Asked Questions

What factors contributed to FedEx's disappointing fourth quarter loss?

FedEx's disappointing fourth quarter loss was primarily attributed to rising fuel prices and a weak economy. Increased operational costs due to higher fuel expenses impacted profitability, while economic slowdowns led to reduced shipping volumes as both consumers and businesses cut back on spending.

How did fuel prices specifically affect FedEx's financial performance?

Rising fuel prices significantly increased FedEx's operating costs, which are a major component of their overall expenses. As fuel costs rose, the company faced higher transportation expenses, which squeezed profit margins and contributed to the overall loss in the fourth quarter.

What impact did the weak economy have on FedEx's shipping volumes?

The weak economy resulted in decreased demand for shipping services, as both consumers and businesses reduced their spending. This decline in shipping volumes directly affected FedEx's revenue, leading to lower sales and ultimately contributing to the company's financial losses in the fourth quarter.

What measures is FedEx taking to address these challenges?

In response to the challenges posed by rising fuel prices and a weak economy, FedEx is likely implementing cost-cutting measures, optimizing their operations, and exploring pricing adjustments. The company may also focus on enhancing efficiency and diversifying services to mitigate the impact of economic fluctuations.

What are the long-term implications of this fourth quarter loss for FedEx?

The long-term implications of the fourth quarter loss for FedEx could include a reassessment of their business strategies, potential restructuring, and a focus on innovation to adapt to changing market conditions. Continued financial struggles may also affect investor confidence and the company’s ability to invest in growth initiatives.

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