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FedEx’s (FDX) top executive assailed current U.S. trade policy as more protectionist measures threaten to upend the courier company’s business plans and take a bite out of its bottom line.
“It reminds me a bit about that old adage of Mike Tyson that everybody has got a plan until they get hit in the mouth,” FedEx CEO Fred Smith said. “So clearly, we’ve been very disappointed over the last few years with the assumptions that we made on the growth in international trade, particularly with the Trump administration.”
Smith made his remarks during a call with investors Tuesday in response to Barclays analyst Brandon Oglenski’s inquiry into FedEx’s growth strategy, especially relating to the company’s Express international air shipping business.
FedEx Express’ operating income came under pressure in the fourth quarter, and the company declined to project fiscal 2020 earnings results for the segment. FedEx said trade disputes and low global growth rates created “significant uncertainty” for the business unit.
“The United States policy since 1934 with Roosevelt and Secretary of State Cordell Hull was to expand international trade,” Smith said. “And now we have a huge dispute where the United States is basically become protectionist defined as, ‘I’ll make everything I need in my own borders. I don't need to import things and quite frankly don't particularly need to export them.’”
Smith also acknowledged what he considered to be flaws with other countries’ trade policies as well, which have further confounded global trade flows.
“We don’t agree with the Chinese position on trade either – and have been very vocal about that – which is mercantilist,” he added.
In its fourth-quarter earnings release Tuesday, FedEx reported that its results for the current fiscal year would be negatively impacted by “weakness in global trade and industrial production.” The company guided toward a mid-single-digit percentage point decline in fiscal 2020 diluted earnings per share, after adjusting for certain retirement plans and integration expenses related to its acquisition of TNT Express.
For the fiscal fourth quarter, FedEx reported better-than-expected results on the top and bottom lines, delivering adjusted earnings per share of $5.01 on revenue of $17.8 billion.
‘Virtually impossible task’
FedEx has also taken issue with other dealings in U.S. trade policy.
The Memphis, Tennessee-based company earlier this week filed a lawsuit against the U.S. Commerce Department requesting that the government “be permanently enjoined from enforcing the export administration regulations against FedEx in circumstances when the company has no knowledge that the contents of the shipment are subject to the [Export Administration Regulations],” FedEx’s general counsel said.