FedEx cuts sales forecast by half a billion dollars, warns of global recession

Shares FedEx (FDX) It fell 22 percent in early trading after the open Friday after it warned late Thursday that a faltering economy would cause it to fall $500 million short of its revenue target. The weakening global economy, particularly in Asia and Europe, has hurt FedEx’s fast delivery. The company said demand for packages weakened significantly in the final weeks of the quarter.

In an interview on CNBC on Thursday, FedEx CEO Raj Subramaniam said he believes the slowdown in business signals the beginning of a global recession.

He said that the volume of cargo that FedEx is handling in all regions around the world is decreasing. US consumers are somewhat protected by the strength of the dollar, which is boosting their purchasing power, but FedEx said there is also a slowdown in American spending.

The company said it was responding by reducing flights and temporarily grounding planes, cutting staff hours, delaying some hiring plans and closing 90 FedEx offices and five corporate offices. In the year For the fiscal year that runs through May 2023, the budget is cutting $500 million from capital spending, bringing spending down to $6.3 billion.

“We’re going into full cost-management mode,” he told CNBC.

FedEx, while issuing sharply reduced guidance for the current quarter, said it was withdrawing full-year guidance from June due to “continued volatile operating conditions.”

FedEx Ground Service, the company’s primary way of handling purchases by American consumers, missed its sales target by $300 million.

FedEx said it will work with contractors who have problems. He sued a former contractor who was a vocal critic of the company.

“We recognize that current economic conditions are creating new challenges,” FedEx Ground said in a statement last month. “We are committed to working with carrier businesses individually to solve the challenges in their situations. Our goal is to enable success for FedEx Ground and carriers.”

About 1,000 of FedEx’s 6,000 contractors have joined a union to demand better compensation.

In a survey released this week by the association, 54% said their business with FedEx was losing money, 35% said it was going bankrupt, and only 11% said it was profitable. According to the association’s survey, 1,200 contractors have left the organization in the past 12 months.