FedEx Corp withdrew its financial forecast issued just three months ago on Thursday, citing a global demand slowdown that accelerated at the end of August and was expected to worsen in the November quarter.
Shares of the global delivery company fell more than 16 per cent after it reported revenue and profit for the first quarter ended Aug. 31 that fell short of Wall Street expectations. S&P 500 futures fell on Thursday as FedEx added to concerns about the global economy slowing. more info
FedEx Express revenues were down $500 million and FedEx Ground revenues were down $300 million in the third quarter due to a global slowdown in economic activity, according to FedEx.
FedEx announced cost-cutting measures such as closing some FedEx Office locations, reducing labor hours, and consolidating some sorting facilities.
The warning comes as consumers around the world face rising costs for necessities such as food, fuel, and shelter, while shifting spending away from e-commerce and toward in-person shopping, dining, and travel.
The World Bank said earlier this week that the world's three largest economies - the United States, China, and the eurozone - have been slowing sharply, and that even a "modest hit to the global economy over the next year could tip it into recession."
Some experts believe FedEx should have recognized cooling demand much sooner, especially after Amazon admitted to overbuilding warehouses, U.S. seaport directors signaled slowing imports, and consumer discretionary spending continued to struggle due to inflation.
"They should have seen this coming a month ago," said Satish Jindel, an industry consultant who helped start and expand the company that became FedEx Ground.
FedEx overestimated demand for last year's peak holiday shipping season, resulting in complaints from independent contractors who were forced to pay for unneeded trucks and workers.
During the pandemic, shippers such as FedEx and UPS imposed a variety of surcharges for everything from fuel to special handling, and those profit-boosting charges are now at risk, according to Jindel.
FedEx said on Thursday that its business has been hampered by service issues in Europe and macroeconomic issues in Asia. China, the region's largest economy, is dealing with COVID-19 lockdowns and heat-related power outages.
In extended trading, the warning dragged down shares of rival delivery companies as well as retailers. United Parcel Service was down 5 per cent , while Amazon was down 1.9 per cent .
According to Refinitiv IBES, FedEx expects to report first-quarter revenue of $23.2 billion, falling short of analysts' expectations of $23.59 billion. Adjusted earnings per share are expected to be $3.44, well below estimates of $5.14.
The company has withdrawn its fiscal year forecast.
According to Cowen analyst Helane Becker, the wide gap between FedEx's performance and Wall Street's expectations comes after analysts had already tempered their expectations for the quarter, and company shares have lost about 10 per cent of their value since they issued their now-withdrawn forecast in June.
And the warning is likely to increase pressure on FedEx's new CEO, Raj Subramaniam, to close a profitability gap with UPS, after the company ceded two director seats to activist investor D.E. Shaw in December.
“Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the U.S. We are swiftly addressing these headwinds, but given the speed at which conditions shifted, first quarter results are below our expectations,” Subramaniam said in a statement.
(Source:www.economictimes.com)
Shares of the global delivery company fell more than 16 per cent after it reported revenue and profit for the first quarter ended Aug. 31 that fell short of Wall Street expectations. S&P 500 futures fell on Thursday as FedEx added to concerns about the global economy slowing. more info
FedEx Express revenues were down $500 million and FedEx Ground revenues were down $300 million in the third quarter due to a global slowdown in economic activity, according to FedEx.
FedEx announced cost-cutting measures such as closing some FedEx Office locations, reducing labor hours, and consolidating some sorting facilities.
The warning comes as consumers around the world face rising costs for necessities such as food, fuel, and shelter, while shifting spending away from e-commerce and toward in-person shopping, dining, and travel.
The World Bank said earlier this week that the world's three largest economies - the United States, China, and the eurozone - have been slowing sharply, and that even a "modest hit to the global economy over the next year could tip it into recession."
Some experts believe FedEx should have recognized cooling demand much sooner, especially after Amazon admitted to overbuilding warehouses, U.S. seaport directors signaled slowing imports, and consumer discretionary spending continued to struggle due to inflation.
"They should have seen this coming a month ago," said Satish Jindel, an industry consultant who helped start and expand the company that became FedEx Ground.
FedEx overestimated demand for last year's peak holiday shipping season, resulting in complaints from independent contractors who were forced to pay for unneeded trucks and workers.
During the pandemic, shippers such as FedEx and UPS imposed a variety of surcharges for everything from fuel to special handling, and those profit-boosting charges are now at risk, according to Jindel.
FedEx said on Thursday that its business has been hampered by service issues in Europe and macroeconomic issues in Asia. China, the region's largest economy, is dealing with COVID-19 lockdowns and heat-related power outages.
In extended trading, the warning dragged down shares of rival delivery companies as well as retailers. United Parcel Service was down 5 per cent , while Amazon was down 1.9 per cent .
According to Refinitiv IBES, FedEx expects to report first-quarter revenue of $23.2 billion, falling short of analysts' expectations of $23.59 billion. Adjusted earnings per share are expected to be $3.44, well below estimates of $5.14.
The company has withdrawn its fiscal year forecast.
According to Cowen analyst Helane Becker, the wide gap between FedEx's performance and Wall Street's expectations comes after analysts had already tempered their expectations for the quarter, and company shares have lost about 10 per cent of their value since they issued their now-withdrawn forecast in June.
And the warning is likely to increase pressure on FedEx's new CEO, Raj Subramaniam, to close a profitability gap with UPS, after the company ceded two director seats to activist investor D.E. Shaw in December.
“Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the U.S. We are swiftly addressing these headwinds, but given the speed at which conditions shifted, first quarter results are below our expectations,” Subramaniam said in a statement.
(Source:www.economictimes.com)
Homepage
Send to a friend
Printable version
Share
