FedEx on Thursday announced rate hikes and detailed its cost-cutting efforts following the shipping giant warned the other day that its fiscal first quarter results were hit by weakening global demand.
Shares of FedEx closed slightly higher following the earnings announcement, that was unintentionally released prior to the bell. “The first earnings release was a tech issue rather than intentional,” a spokesperson for the business said.
The other day, the business’s stock sank after it posted preliminary revenue and earnings that fell lacking Wall Street expectations. CEO Raj Subramaniamcited a hardcore macroeconomic environment, and said he expects the economy to enter a “worldwide recession.” The business withdrew its guidance for the entire year and said it could slash costs.
An individual walks by way of a FedEx van in NEW YORK, May 9, 2022.
Andrew Kelly | Reuters
The shipping giant struggled with light volumes in the quarter, citing headwinds in its Europe and Asia markets. The indegent results shocked the marketplace, as investors tried to tell apart market woes from FedEx’s own internal shortcomings.
In issuing its full first quarter results Thursday, the business said that its Express, Ground and Home Delivery rates increase by typically 6.9%. Its FedEx Freight rates increase by typically 6.9%-7.9%, the business said.
In addition, it said it believes it’ll save between $1.5 billion and $1.7 billion by parking planes and reducing flights. The closure of certain locations, the suspension of some Sunday operations, along with other expense actions helps you to save FedEx Ground between $350 million and $500 million, based on the company.
FedEx said it’ll save yet another $350 million to $500 million by reducing vendor use, deferring projects and closing office locations.
“We’re moving with speed and agility to navigate a hard operating environment, pulling cost, commercial, and capacity levers adjust fully to the impacts of reduced demand,” said Subramaniam.
Because of its fiscal 2023, the business expects total cost benefits of $2.2 billion to $2.27 billion.
Despite its bleak warning the other day, FedEx stood by its 2025 projections lay out in June. The business is forecasting annual revenue growth of between 4% and 6% and earnings per share growth of between 14% and 19%.