FedEx outlines cost-cutting plan after profit loss According to Reuters

© Reuters. A FedEx express delivery vehicle is seen in Long Beach, California, U.S., September 16, 2022. REUTERS / Bing Guan

By Lisa Baertlein and Nathan Gomes

(Reuters) -FedEx Corp on Thursday outlined cost cuts of up to $2.7 billion from plane parking, suspending some Sunday deliveries and closing corporate offices after Falling demand hit first-quarter profits.

The company reported that earnings per share fell 21.3% in the quarter ended August 31, in line with the warning it issued last week. It blames a rapidly deteriorating global economy, but analysts and investors are skeptical – in large part due to a 5.5% increase in revenue.

On Thursday, FedEx (NYSE:) confirmed investors and analysts’ suspicions that it wasn’t cutting costs fast enough to offset demand.

FedEx said in a statement detailing its plans to cut costs from $2.2 billion to $2.7 billion in fiscal year 2023: Operating costs remain high relative to demand.

“We are moving with speed and agility to navigate a difficult operating environment, pulling cost, commercial and capacity levers to adjust to the impact,” said Chief Executive Officer Raj Subramaniam. dynamics of reduced demand”.

News that the company plans to reduce profit-eroding excess capacity sent shares up 1.1% to $154.95 in afternoon trading.

The company says other cost reductions will come from flying fewer FedEx Express flights, reducing change-incentives to motivate and retain workers, and closing some hubs. sorting packages and delaying certain projects.

The Memphis-Tennessee-based company said adjusted operating income for the quarter ended August 31 fell to $1.23 billion, or $3.44 per share, from $1.49 billion USD, or $4.37 per share, the previous year. It blamed macroeconomic weakness in Asia, service challenges in Europe and weak sales in the US delivery unit for the results that sent the stock sliding to its lowest level in years. 20 years.

Revenue for the quarter rose to $23.2 billion from $22 billion a year earlier.

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