FedEx warns of deteriorating economy and withdraws forecast;  shares fall 16%

FedEx warns of deteriorating economy and withdraws forecast; shares fall 16%

FedEx employees sort packages in Manhattan, New York, U.S., May 9, 2022. REUTERS/Andrew Kelly

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Sept 15 (Reuters) – FedEx Corp on Thursday withdrew the financial forecast it issued just three months ago, saying a slowdown in global demand accelerated in late August and was set to unwind. worsen during the November quarter.

Shares of the global delivery company fell more than 16% after it also reported revenue and profit for the first quarter ended Aug. 31 that fell short of Wall Street targets. S&P 500 futures fell on Thursday as FedEx added to concerns about a slowing global economy. Read more

In total, a global slowdown in economic activity led to a shortfall in FedEx Express revenue of $500 million and FedEx Ground revenue of $300 million in the quarter, FedEx said.

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FedEx said it was cutting costs, including closing some FedEx offices, reducing work hours and consolidating some sorting facilities.

The warning comes as consumers around the world grapple with higher costs for necessities like food, fuel and shelter, while shifting spending from e-commerce to shopping, dining and in-person travel.

Earlier on Thursday, the World Bank said the world’s three largest economies – the United States, China and the eurozone – had slowed sharply, and even “a moderate blow to the global economy over the past next year could tip it into recession”.

Some pundits said FedEx should have caught the wind of falling demand much quicker — especially after Amazon announced it was building warehouses, US seaport managers reported a deceleration in imports and consumer discretionary spending continued to struggle with inflation. Read more

“They should have seen this happen a month ago,” said Satish Jindel, an industry consultant who helped start and grow the business that became FedEx Ground.

FedEx overstated demand for last year’s peak holiday shipping season, prompting complaints from its independent contractors who paid for unnecessary trucks and workers.

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Shippers like FedEx and UPS have imposed a variety of surcharges during the pandemic for issues ranging from fuel to special handling, and those profit-maximizing charges are under threat, Jindel said.


FedEx said Thursday that business was hit by service issues in Europe and macroeconomic issues in Asia. The region’s largest economy, China, is grappling with COVID-19 shutdowns and heatwave-induced power outages.

The warning sent shares of rival delivery companies lower as well as retailers in the extended trade. United Parcel Service (UPS.N) fell 5%, while Amazon (AMZN.O) fell 1.9%.

FedEx expects to report first-quarter revenue of $23.2 billion, missing analysts’ expectations of $23.59 billion, according to Refinitiv IBES. Adjusted earnings are expected to be $3.44 per share, well below estimates of $5.14.

The company withdrew its guidance for the year.

The wide gap between FedEx’s performance and Wall Street expectations comes after analysts have already tempered estimates for the quarter, said Cowen analyst Helane Becker, who added that the company’s shares lost about 10% of their value since they published their now withdrawn forecast in June. .

And the warning will likely increase pressure on new FedEx CEO Raj Subramaniam to close a profitability gap with UPS, after ceding two director seats to activist investor DE Shaw in June.

“Global volumes declined as macro trends worsened significantly later in the quarter, both internationally and in the U.S. We are tackling these headwinds quickly, but given the speed at which conditions have changed, the first quarter results are below our expectations,” Subramaniam said in a statement. .

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Reporting by Nathan Gomes and Shariq Khan in Bengaluru and Lisa Baertlein in Los Angeles; Editing by Peter Henderson and Christopher Cushing

Our standards: The Thomson Reuters Trust Principles.

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