Deutsche Post DHL is performing solidly during the Covid-19 pandemic and is profiting from a continuing boom in German e-commerce, according to CEO Frank Appel, but rival FedEx is taking a $370 million financial hit on its US retail subsidiary.
Appel told financial journalists last week that the group expects to beat its original forecast of 5% growth in the German parcel market this year as e-commerce booms during the pandemic and more consumers buy a wider range of goods from different online retailers.
This trend also reduces the importance of Amazon, which previously accounted for 6% of the German parcel business (and just 2% worldwide), he underlined, according to a Reuters report.
However, it is unclear whether the current e-commerce boom will continue later in the year as German unemployment rises, he cautioned.
The DP DHL chief also underlined the importance of the 250-plane DHL Express fleet to provide airlift capacity for the group amid a continuing shortage of commercial passenger flights offering bellyhold space. This shortage could push up air freight rates in the second half of the year, he warned.
“We will see a significant contraction of cargo capacity in passenger planes… That will be to the advantage of operators like us, who have relatively good access to cargo planes,” the Financial Times cited him as saying.
Appel also reiterated his view that globalization will continue to accelerate despite the pandemic’s disruption of supply chains. “It is nonsense to say that global supply chains are doing to change. Customers will not pay for the extra costs,” he declared.
Deutsche Post DHL, which will publish its results for the April – June 2020 quarter on August 5, has withdrawn its financial forecasts for the full year. The group suffered a financial hit of €210 million from the impact of the Covid-19 pandemic in the January – March quarter.
FedEx records $348 million charge from FedEx Office pandemic impact
Meanwhile, the Covid-19 pandemic has seriously hit business at FedEx Office where revenues have declined as demand for printing, package and shipping services has dropped away and stores have been forced to close temporarily. This negative impact is expected to continue for the near future.
In response, FedEx announced in a filing late on Friday that it will record non-cash asset impairment charges of $348 million in the quarter ending May 2020 for the US retail network (formerly called Kinko’s), which it acquired in 2004.
The company expects total impairment charges of $370 million in the March – May 2020 quarter due to a goodwill impact at FedEx Supply Chain (formerly Genco), which was acquired in 2015, and other charges at FedEx Supply Chain and FedEx Logistics.
FedEx will announce results for the March – May 2020 final quarter of its 2019/20 fiscal year on June 30. The company is postponing the release from the original June 23 date in light of the COVID-19 pandemic and ongoing “shelter in place” requirements.
