FedEx warns on profit, slashes outlook as demand slumps
FedEx announced Thursday that it is closing down storefronts and corporate offices, while laying off new employees in a belt-tightening drive caused by a drop in global package delivery business.
The company based in Memphis, Tennessee, warned it will likely miss Wall Street’s profit target for its fiscal first quarter that ended Aug. 31. It also stated that it expects business conditions will continue to weaken due to weaker global volumes.
Its stock fell more than 16% in after-hours trading following the announcement.
“Global volumes fell as macroeconomic trends significantly worsened in the quarter, both nationally and internationally,” FedEx CEO Raj Subramaniam stated in a statement. “We are swiftly addressing these headwinds, but given the speed at which conditions shifted, first-quarter results are below our expectations.”
The company’s FedEx Express business was particularly hurt by challenges in Europe and weaker economic trends in Asia, which led to a roughly $500 million revenue shortfall for the segment. FedEx Ground revenue came in at $300 millions below what the company had expected.
High operating expenses also had a negative impact on the company’s performance, FedEx stated.
FedEx responded by saying it would reduce costs by closing more 90 FedEx Offices and five corporate offices, deferring new hirings, and operating fewer flights. The company scrapped its forecasts for earnings in its current fiscal years that it had published less than three months before.
For the three months ended Aug. 31, FedEx now projects adjusted earnings per share of $3. 44 and $23.2 billion in revenue. Analysts’ consensus forecast was $5. 14 adjusted earnings per share and $23.6 billion in revenue, according to FactSet.
Subramaniam stated that he is confident that FedEx will meet its financial targets for fiscal year HTML1.
For the current quarter, which ends in November, FedEx expects revenue to range between $23.5 billion and $24 billion, and adjusted earnings per share of at least $2.75. Analysts on Wall Street had predicted adjusted earnings per share of $5. 48 and $24. According to FactSet, 86 billion in revenues.
The company still plans to purchase $1.5 billion of its common stock during fiscal 2023. It plans to buy back $1 million of its common stock in the second quarter.
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