FedEx to Close Offices, Park Aircraft After Warning of Sales Shortfall
FedEx Corp.
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 tumbled 13% on the warning, which came after markets were closed Thursday and about a week before the company was scheduled to report results for the quarter ended Aug. 31.
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 also faced calls from some of the contractors that handle its Ground packages to help them with higher fuel and labor 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 $500 million compared with the company’s forecast.
Revenue at FedEx Ground, which mostly handles e-commerce deliveries in the U.S., was about $300 million below company forecasts. Overall the company expects revenue of $23.2 billion and earnings of $3.33 per share. Wall Street had been expecting first-quarter revenue of $23.6 billion and earnings of $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 $23.5 billion to $24 billion. It expects earnings per share of $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-fueled 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.
—Kathryn Hardison contributed to this article.
Write to Esther Fung at esther.fung@wsj.com
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Appeared in the September 16, 2022, print edition as ‘FedEx Revenue Misses Quarterly Forecasts.’
