FedEx announced on Thursday that it is closing stores and corporate offices and delaying new employees as part of a cost-cutting initiative prompted by a decline in its global package transportation business.
Memphis, Tennessee-based firm warned it will likely fail Wall Street’s profit goal for its fiscal first quarter, which ended on August 31. And it stated that it anticipates business circumstances to deteriorate further in the current quarter due to a decline in worldwide volume.
Following the revelation, the company’s stock dropped more than 20% in after-hours trade.
FedEx CEO Raj Subramaniam said in a statement, “Global volumes decreased as macroeconomic indicators deteriorated dramatically later in the quarter, both internationally and in the United States.” “We are swiftly addressing these obstacles, but considering how quickly conditions moved, our first-quarter performance fell short of our expectations.”
The FedEx Express portion of the company’s operations suffered a revenue deficit of around $500 million due to difficulties in Europe and poor economic trends in Asia. Meanwhile, FedEx Ground revenue was approximately $300 million below the company’s projections.
FedEx stated that the company’s results were hampered by its high operational expenses. In response, the company announced that it will reduce expenses by eliminating more than 90 FedEx Office sites and five corporate offices, delaying new recruitment, and operating fewer aircraft.
The corporation discarded its profitability prediction for the current fiscal year, which it had set less than three months prior. FedEx now forecasts adjusted profits per share of $3.44 and sales of $23.2 billion for the quarter ending August 31. According to FactSet, analysts had predicted adjusted profits per share of $5.14 and revenue of $23.6 billion.
Stocks continue to fall.
The news of FedEx’s dismal performance appeared to frighten investors, depressing global markets and precipitating a dramatic decline in U.S. stock futures. The S&P 500 index was roughly 1% lower prior to the opening of trading on Friday. Futures for the Dow and Nasdaq were down 0.8% and 1%, respectively.
Following the release of the August inflation report at 5:31 a.m., stocks fall.
Investor mood has deteriorated this week following the release of official statistics on Wednesday indicating that inflation remained elevated in August, paving the way for the Federal Reserve to raise its benchmark interest rate again next week.
Wall Street analyst Adam Crisafulli wrote in a research note on Friday, “The bears crushed the bulls for three primary reasons: the August CPI exceeded expectations, Fed tightening estimates continued to rise, and FedEx depicted an economy experiencing a significant slowdown