By Lisa Baertlein
(Reuters) -U.S. delivery firm FedEx Corp posted a 7% drop in quarterly profit and lowered its full-year profit forecast on Tuesday, after labor costs crimped earnings growth from surging e-commerce shipping and higher shipping rates.
Shares in the Memphis, Tennessee-based company fell 3.8% to $242.46 in extended trading after FedEx said difficulty hiring resulted in a $450 million year-over-year increase in costs due to network hiccups, higher wage rates and more spending on transportation services.
“The current labor environment is driving inefficiencies in the operation of our networks and significantly impacting our financial results,” FedEx Chief Operating Officer Raj Subramaniam said in a statement.
Adjusted net income fell to $1.19 billion, or $4.37 per share, for the fiscal first quarter ended Aug. 31, from $1.28 billion, or $4.87 per share, a year earlier.
Revenue increased to $22.0 billion from $19.3 billion.
On the heels of the report, FedEx lowered its full-year forecast for earnings, excluding items, to $19.75 to $21.00 per share. FedEx previously forecast 2022 earnings per share, excluding items, of $20.50 to $21.50.
FedEx and competitor United Parcel Service Inc are sprinting to hire holiday workers as the resurgence of Delta variant-driven COVID-19 infections threatens to increase e-commerce delivery demand during the holiday season, when package volume can easily double.
FedEx aims to hire 90,000 workers to handle the year-end holiday shipping spike. It hired 70,000 last year and 55,000 in 2019.
Up-and-coming rival Amazon.com Inc is touting average pay of $18 per hour as it races to expand its own delivery network. Amazon’s nonunion delivery contractors compete with FedEx and its delivery partners for workers.
Shares in UPS shed 2.2% after the FedEx report.
At the market close on Tuesday, shares in FedEx were down 10% over the past six months, underperforming UPS shares’ gain of 19%.
(Reporting by Lisa Baertlein in Los Angeles; Editing by Chris Reese and Peter Cooney)
