A weakening global economy, especially in Asia and Europe, is hurting FedEx’s express delivery business. Demand for packages weakened significantly in the last few weeks of the quarter, according to the company.
Additionally, FedEx said it expects the business environment to deteriorate further in the current second quarter, which runs through November. Global earnings are likely to remain flat this quarter compared to last year, while FedEx earnings are expected to plunge more than 40%. Analysts had predicted an increase in profits.
“I think so,” he replied. “These numbers don’t bode well.”
He said the volume of shipments handled by FedEx is declining in all regions of the world. He said US consumers are to some extent protected by the strong dollar, which is increasing purchasing power, but said FedEx is also seeing a slowdown in US spending.
The company said it was responding by reducing flights and temporarily parking aircraft, reducing staff hours, postponing some hiring plans, and closing 90 FedEx offices and five corporate offices. . He also cut $500 million from the capital spending budget for the fiscal year ending May 2023, cutting that spending to $6.3 billion.
“We’re in full cost control mode,” he told CNBC.
FedEx has significantly lowered its guidance for the quarter, but said it was withdrawing its full-year guidance issued in June “due to the continued volatile business environment.
FedEx Ground service, the company’s primary method of handling the delivery of online purchases by US consumers, fell short of its sales target by $300 million.
FedEx claims to work with contractors who have problems. It sued its former contractor, which has been the company’s most vocal critic.
In a statement last month, FedEx Ground said, “We recognize that the current economic climate presents new challenges. We remain committed to addressing challenges and our goal is to enable both FedEx Ground and service providers to succeed.”
Approximately 1,000 of the 6,000 FedEx contractors join industry associations to lobby the company for better compensation.
A survey conducted by the association released this week found that 54% said they were losing money trading with FedEx, 35% said they were breaking even, and just 11% said they were profitable. did. The survey reached 1,200 of his contractors who either work for the company or have left the company within the past 12 months, the association said.
