FedEx to Close Offices, Park Aircraft After Warning of Sales Shortfall

Delivery giant says volumes of packages and revenues fell below expectations.

By guest author Esther Fung from the Wall Street Journal. Kathryn Hardison contributed to this article.

 

Related Video

The consumer-sentiment index and the consumer-confidence index both try to measure the same thing: consumers’ feelings. WSJ explains why the Federal Reserve is keeping a close eye on consumer confidence in 2022. Illustration: Adele Morgan

FedEx Corp. FDX said its quarterly revenue fell below its expectations and it was closing offices and parking aircraft to offset declining volumes of packages moving around the world.

FedEx shares fell as much as 19 % in off hours trading on the warning, which came after markets were closed Thursday and about a week before the company was scheduled to report quarterly results.

Chief Executive Raj Subramaniam, who took over in June, said he was taking actions to reduce costs including freezing hiring, closing 90 FedEx Office locations, parking some cargo aircraft, reducing Sunday ground operations and closing five corporate offices. FedEx didn’t say if it was cutting its workforce.

FedEx has faced pressure from an activist investor to boost its profitability and faced calls from some of the contractors that handle its Ground packages to help them with higher fuel and labour costs.

The Memphis, Tenn.-based company said results from its largest unit, Express, were curbed by macroeconomic weakness in Asia and service challenges in Europe. That led to a revenue shortfall of about USD 500 million compared with the company’s forecast.

Revenue at FedEx Ground, which mostly handles e-commerce deliveries in the U.S., was about USD 300 million below company forecasts. Overall the company expects revenue of USD 23.2 billion and earnings of USD 3.33 per share. Wall Street had been expecting first-quarter revenue of USD 23.6 billion and earnings of USD 5.14 per share, according to FactSet.

The company said it was withdrawing its full-year financial forecasts issued in June. For the second quarter, the company guided for revenue between USD 23.5 billion to USD 24 billion. It expects earnings per share of USD 2.65 or greater.

In June, FedEx said it was focused on improving profit margins and streamlining its operations, even as costs from fuel and wages have risen. Package volume has been declining after the pandemic-fuelled boom in online shopping has cooled.

“People are buying less. They are paying more for air travel and other experiences,” said Satish Jindel, president of research firm SJ Consulting Group.

“It’s going to be hard to make up the volumes for the rest of the year,” Mr. Jindel said, adding that he doesn’t expect the average daily parcel volume in the coming peak delivery season to exceed last year’s.

www.wsj.com