FedEx Corp. (FDX - Get Report) shares slipped lower Monday after the group was forced to issue its second apology in as many months for failing to complete the shipping of a package linked to China-backed Huawei Technologies.
FedEx said an "operational error" prevented the shipping of a Huawei phone from Britain to the United States, where it was meant to arrive at the offices of PCMag for a product review. China's Foreign Ministry said FedEx needed to explain why the shipment was intercepted while the Global Times newspaper said officials were considering adding FedEx to a government list of so-called "unreliable entities" that could keep it from doing business in the world's second-largest economy, where it generates around 7% of its global revenues.
"The package in question was mistakenly returned to the shipper, and we apologize for this operational error," Fedx said in a statement provided to PCMag. "As a global company that moves 15 million shipments each day, we are committed to compliance with all rules and regulations and minimizing impact to our customers as we adjust our operations to comply with a dynamic US regulatory environment."
FedEx shares were marked 1.8% lower Monday to change hands at 162.68 each, a move that would trim the stock's year-to-date advance to just 0.66%.
China urged #Fedex to give reasonable explanation and take responsibility for not delivering a Huawei phone to the US: FM. The ministry did not comment on whether Fedex will be put into the unreliable entity list, but said that the US bullying has also hurt US companies. pic.twitter.com/Yx3HICYjiE— Global Times (@globaltimesnews) June 24, 2019
FedEx has been operating in China since 1984, and has a 54.6% of the logistics market in China, according to technographics provision firm Datanyze. Package delivery rivals DHL (DPSGY) and United Parcel Service (UPS - Get Report) are also heavily involved in China, with market shares of 25% and 17% respectively.
Last month, FedEx issued a similar apology for mishandling packages destined for Huawei amid accusations that it deliberately diverted four parcels addressed to the Chinese tech giant's offices in Asia.
Huawei said the packages, which contained company documents, were re-routed by FedEx back to the United States, and warned the alleged diversion would force it to "review" its relationship with the courier.
Earlier this year, FedEx cut its full-year profit forecast for the second time in three months in March after reporting weaker-than-expected third quarter earnings linked to the broader global slowdown in trade and package demand.
"Since our last earnings call, we have seen the overall China economy slow down further, and this has impacted other Asian economies," CEO Fred Smith told investors on March 19. "Given the size of China, no markets will be able to absorb more than a fraction of what China produces, but customers continue to look to diversify from China."
"We have also seen some customers evaluate mode optimization. Our network and portfolio lets customers respond quickly and act locally for our customers in China, as well as around the world," he added.