Air Freight News

FedEx cost cuts aim to save $2.7 billion as demand weakens

FedEx Corp. expects to save as much as $2.7 billion this fiscal year through wide-ranging cost-cutting measures in response to weakening business conditions.

The courier said about $700 million of the savings will come this quarter through actions including a reduction in flight frequencies, deferred projects and the closure of some offices, according to a regulatory filing Thursday. The actions are in line with those sketched out last week when the company revealed preliminary earnings that fell well short of Wall Street’s expectations.

“We’re moving with speed and agility to navigate a difficult operating environment, pulling cost, commercial and capacity levers to adjust to the impacts of reduced demand,” Chief Executive Officer Raj Subramaniam said in the filing, which also detailed quarterly earnings. FedEx also plans to increase delivery rates across its express, ground and home delivery operations by an average of 6.9% in January.

Shares of the company pared a gain of as much as 4.8% to trade up 2.3% to $156.69 as of 2:53 p.m. in New York, reversing an earlier decline. The stock is down about 39% this year.

The results show how FedEx is grappling with slowing demand in addition to numerous challenges, including a tight labor market that has pushed up costs and unrest in its network of contractors who deliver packages by truck.

Adjusted earnings during the fiscal first quarter were $3.44 a share, matching the preliminary figure from Sept. 16. Revenue was $23.2 billion in the period ended Aug. 31.

Operating income at FedEx Express plummeted with global package and freight volume declining 11%, as cost-cutting failed to keep pace with the downturn in demand in the period. The company’s ground-delivery unit saw operating profits gain 3%, aided by higher fuel surcharges and an uptick in home deliveries though they were partially offset by higher operating costs.

Bloomberg
Bloomberg

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© Bloomberg
The author’s opinion are not necessarily the opinions of the American Journal of Transportation (AJOT).

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