FedEx: profit warning is not all macro-related

US logistics giant FedEx thinks a global recession is coming. The company helped to send the S&P 500 to a two-month low on Friday after it issued a huge profit warning and scrapped full-year financial forecasts issued just three months ago.

FedEx was quick to blame deteriorating macroeconomic conditions for its woes. It said a drop-off in business in Asia, Europe and the US meant first-quarter adjusted earnings would come in a third below analysts’ expectations.

FedEx shares fell 23 per cent. Yet a much milder 4 per cent decline in the shares of rival UPS suggests that at least some of FedEx’s problems may be its own doing.

FedEx bet big on Europe in 2016 with the €4.4bn acquisition of ailing Dutch rival TNT Express. The deal was supposed to bolster its position in the European ecommerce market and transform it into a one-stop shipping hub for European and non-European companies.

But the deal has been a dud. Integration has been costlier and more difficult than expected. FedEx’s greater exposure to international shipping has made it vulnerable to the surge in energy costs as well as weakening demand in Europe and Asia. At its Express division, operating income is forecast to be 69 per cent lower.

In the US, FedEx has been embroiled in a labour dispute with many of the 6,000 contractors that make last-mile deliveries for its Ground unit. It has struggled to hire and retain drivers and other workers. Labour shortfalls have made its operations less efficient. At UPS, unionised workers enjoy some of the highest wages in the industry. That has fostered workforce stability and allowed UPS to operate with minimal delays and disruptions.

FedEx’s warning about a $300mn shortfall in Ground revenue could be more a byproduct of customers switching over to UPS than a sudden precipitous drop-off in consumer spending. The macroeconomic environment may not be favourable but management must shoulder some of the blame too.