FedEx on Thursday announced rate hikes and detailed its cost-cutting efforts after the shipping giant warned last week that its fiscal first quarter results were hit by weakening global demand.
Shares of FedEx closed slightly higher after the earnings announcement, which was unwittingly released before the bell. “The early earnings release was a technical and unintended problem,” a company spokesperson said.
Last week, the company’s stock plummeted after posting preliminary earnings and earnings that didn’t live up to Wall Street expectations. CEO Raj Subramaniam cited a difficult macroeconomic environment and said he expects the economy to enter a “global recession”. The company withdrew its guidance for the year and said it would cut costs.
A person walks by a FedEx van in New York City, May 9, 2022.
Andrea Kelly | Reuters
The shipping giant struggled with light volumes in the quarter, citing headwinds in its European and Asian markets. The poor results shocked the market as investors tried to distinguish market problems from FedEx internal shortcomings.
On Thursday, in publishing its full first quarter results, the company said express, ground and home delivery rates will increase by an average of 6.9%. Its FedEx freight rates will increase by an average of 6.9% -7.9%, the company said.
He also said he believes he will save between $ 1.5 billion and $ 1.7 billion by parking planes and reducing flights. The closure of some locations, the suspension of some Sunday operations and other spending actions will save FedEx Ground between $ 350 million and $ 500 million, according to the company.
FedEx said it will save an additional $ 350 million to $ 500 million by reducing supplier usage, postponing projects and closing office locations.
“We are moving with speed and agility to navigate a challenging operating environment, pushing the levers of cost, commercial and capacity to adapt to the impact of demand reduction,” said Subramaniam.
For its fiscal year 2023, the company expects total cost savings of between $ 2.2 billion and $ 2.27 billion.
Despite last week’s grim warning, FedEx has met the 2025 projections set in June. The company expects annual revenue growth of between 4% and 6% and earnings per share growth of between 14% and 19%.