FedEx released its quarterly earnings on Tuesday, with profits slumping to $745 million compared to $835 million during the same period last year. The package delivery provider said the trade war had something to do with its revenue slump.
According to the Associated Press, CEO Fred Smith admitted that the company is feeling the brunt of "increasing trade tensions and policy uncertainty." He added that the dispute between China and the U.S. weakened shipment and industrial production.
Smith went on to explain that before the fiscal year started, the company was "hopeful" a trade deal would come around to bring back the "normalcy" of growth and profits in the business. Unfortunately, a trade deal has yet to be in sight.
As a result of slower growth, FedEx decided to lower its profit outlook for the rest of 2019. Industry experts said one of the reasons why the company had to lower its forecasts is the end of its contract with Amazon.
Amazon was FedEx's biggest customer before the two sides decided to not renew their collaboration. Analysts said the package giant has yet to find other businesses that could replace the same volume of business it dealt with the e-commerce platform.
Even before FedEx announced the end of its air and ground cooperation with Amazon, the company was already supporting Walmart behind the scenes, Business Insider reported. It is worth noting that the American retail behemoth has been investing in online retail over the past months.
Rakuten data revealed that FedEx supported Walmart's delivery service during the second quarter of this year, accounting for 55 percent of the retail provider's overall deliveries for Q2.
Industry experts believe the delivery company had to give up one partner to focus on another. It appears that FedEx believes Walmart has a chance to go on a head-to-head competition against Amazon, thus the decision to cut off ties.
Meanwhile, FedEx shares already reacted anxiously ahead of the company's first-quarter results unveiling. According to MarketWatch, the stock shed 0.2 percent on Monday afternoon's trading.
Shares have been going up and down over the past months, especially after the company announced the end of its Amazon partnership. It remains to be seen how markets will react to FedEx's less-than-stellar results and a gloomier outlook for the fiscal year.
The delivery giant announced a hike in shipping rates. Starting January 6, 2020, costs will spike by an average of 4.9 percent in three of its delivery arms. For FedEx Freight shipping, rates will ascend by around 5.9 percent.
