FedEx cuts profit outlook after $300M setback from global cyberattack
Ground-shipment unit’s performance, hurricane Harvey also drag Q1 results
FedEx Corp. cut its annual profit forecast, citing the US$300 million cost of a June cyberattack on its TNT Express unit.
The Memphis, Tenn.-based courier now expects to earn no more than US$12.80 a share in the fiscal year ending in May after excluding certain items, FedEx said in a statement Tuesday.
That’s down from an original projection of as much as US$14 and less than the US$13.10 average of analysts’ estimates compiled by Bloomberg.
The global cyberattack in late June struck as the company was stepping up spending to handle more packages from the expansion of online shopping. FedEx also said results at its ground-shipment unit weighed on results, as did hurricane Harvey, which caused flooding along the U.S. Gulf Coast.
“The first quarter posed significant operational challenges due to the TNT Express cyberattack and Hurricane Harvey,” chief executive officer Fred Smith said in the statement.
FedEx had no insurance to cover the attack, which forced TNT to manually process some transactions.
FedEx fell two per cent to US$211.61 after the close of regular trading in New York.
Global operations outside the TNT unit weren’t affected by the virus, which entered the unit’s systems through tax software used in the Ukraine.
FedEx said it found no evidence of a data breach or information lost to third parties.
The shipper also was among companies hit by the WannaCry ransomware in May, although it said that attack didn’t cause a material
disruption to its systems or raise operating costs. Companies around the world struggled to retake control of their networks after the intrusions, which cost them hundreds of millions in potential revenue.
FedEx acquired Dutch shipping company TNT Express for US$4.8 billion last year to gain an extensive parcel delivery system in Europe to compete with United Parcel Service Inc. and Deutsche Post AG’s DHL.
The just-completed quarter was the first in which FedEx reported TNT results as part of its Express division. TNT primarily serves industrial, automotive, high-tech and health-care industries.
FedEx already had planned a 16 per cent expansion in capital spending this year to US$5.9 billion, after delaying some projects at FedEx Ground to help it process more of the growing number of ecommerce shipments and to boost margins.
Deliveries to homes generally have lower yields than to businesses because fewer items are delivered at each stop.
The shipper also said its first quarter profit fell to US$2.51 a share, compared with analysts’ average expectation of US$3. Sales in the period ended Aug. 31 rose four per cent to US$15.3 billion, compared with the average estimate of US$15.35 billion.