In addition to the rampant discounting on the Dell website, this might be another 'clue' as to Dell's online sales...
John
Shipping giants cut forecasts as economy slows
By Bloomberg News
December 15, 2000, 7:20 a.m. PT
ATLANTA--United Parcel Service and Federal Express, the largest package-shipping companies, have cut profit forecasts because U.S. shipments are lagging as the economy slows and consumers are spending less than expected this holiday season.
"Both FedEx and UPS appear to have hit a wall in December," said Gregory Burns, a Lazard Freres analyst. "We expected some moderation for both, but it appears the holiday season is really flat right now."
UPS said shipments in the first two weeks of the holiday season were unchanged from a year ago and that fourth-quarter profit would be lower than analyst forecasts. FedEx said it expects U.S. growth rates for its FedEx Express and FedEx Ground services this month to be unchanged to slightly lower. The company expects profit for its fiscal year ending in May to fall short of analyst estimates.
Shipping companies such as UPS and FedEx often feel the effects of an economic slowdown just after other industries, as corporate customers begin making smaller shipments more often to avoid building inventory as business cools. UPS said its shipments between businesses began slowing in October and November, followed by the unchanged holiday shipments.
UPS shares dropped $3.94, or about 6 percent, to $58.69. FedEx fell $4.31, or about 9 percent, to $41.97. UPS shares have fallen 15 percent this year, while FedEx's stock has risen 2.5 percent.
Profit forecasts
UPS said fourth-quarter profit will be 7 percent to 10 percent higher than the 56 cents a share it earned in the year-earlier period. The average in a First Call/Thomson Financial survey of analysts was 14 percent growth to 64 cents a share.
FedEx said earnings for its fiscal year ending in May now are expected to be $2.50 to $2.60 a share. The First Call average was $2.68. FedEx also estimated earnings for its quarter ended Nov. 30 were 67 cents a share, higher than the average First Call forecast of 64 cents.
The Memphis, Tenn.-based company blamed the lower or unchanged December growth rates on the U.S. economic slowdown and severe winter weather.
UPS delivers more than half the goods bought on the Internet. BizRate.com said U.S. shoppers spent $1.22 billion at Internet retailers last week, though the 46 percent rise so far this season was a little more than half what it expected as consumers buy fewer computers and less clothing. Overall, U.S. retail sales fell 0.4 percent in November, the first drop in seven months.
Most of the two companies' shipments are between businesses. A decline in personal-computer sales to consumers and small businesses, which has caused some computer makers to cut fourth-quarter and 2001 earnings estimates, also is hurting UPS and FedEx.
"Many of our customers are technology customers," said William Margaritis, a FedEx spokesman. "They are experiencing the same sort of effect the general economy is (and) they're part of this slowing growth."
FedEx noted slowing shipments out of Asia, a source of computer parts, and also said Asian exports historically peak before the Christmas shopping season in the United States. The company declined to give specific numbers.
Lower volumes
UPS said even though the busiest days of the holiday season are ahead, U.S. shipments for the two weeks ended Dec. 8 were unchanged. U.S. volume increases slowed to 4 percent in October and November, from 5.5 percent in this year's first nine months.
"At this point, we do believe the primary factor at work here is the slowing of the American economy," said UPS spokesman Norman Black.
The lowered UPS estimate "suggests the economy is a little softer than what we thought it would be," said Douglas Rockel, an ING Barings analyst with a "hold" rating on the company. He also rates FedEx a "hold."
Burns, the Lazard Freres analyst, Thursday cut his ratings on FedEx to "hold" from "outperform." He maintained a "buy" rating on UPS, while cutting the 12-month target for the share price to $70 from $75.
UPS said it expects to meet its goal for 2000 of 10 percent sales growth and income growth in the middle of the 10 percent-to-20 percent range. The company also said that "barring further economic slowing," it expects to meet similar targets in 2001.
UPS expects to ship more than 19 million packages on its busiest day, Dec. 19. FedEx said it still expects to ship 6.5 million packages Dec. 18. |
