FedEx has announced that it would cut more in costs after weak demand ate into its quarterly profit. The company in September announced cost-cutting measures that included parking planes and closing some offices in the face of softening global demand. It also raised package-delivery rates. On Tuesday it said it will be able to cut another $1 billion beyond what it forecast in September, to bring the total fiscal 2023 savings to $3.7 billion compared with its earlier plan for the year.
Second quarter results were constrained by continued demand weakness, particularly at its FedEx Express unit. FedEx Express operating income declined 64% year-over-year due to lower global volumes, partially offset by an 8% package yield increase. FedEx’s net income fell to $788 million in the three months that ended Nov. 30, down from $1.04 billion a year earlier. Sales fell to $22.8 billion in that period, down from $23.5 billion a year earlier, falling short of estimates.
FedEx forecasted full-year earnings per share of between $13 and $14, was just shy of analysts’ expectations of $14.08 per share. The company’s shares are down about 36% for the year as of Tuesday’s close, compared with the S&P 500′s roughly 20% decline.
Why it matters
FedEx’s CEO, Raj Subramaniam, who assumed the position earlier this year, said back in September that weakening global shipment volumes drove FedEx’s disappointing results. While the company anticipated demand to increase after factories shuttered in China due to Covid opened back up, it actually fell, he said. He also stated that he believed a recession was impending for the global economy.