© Reuters A FedEx Express delivery vehicle is seen in Long Beach, California, US, September 16, 2022. REUTERS/Bing Guan
By Lisa Bartlein and Nathan Gomez
(Reuters) – FedEx Corp on Thursday disclosed up to $2.7 billion in costs from parking planes, suspending some Sunday deliveries and closing corporate offices, on first-quarter profit as demand weakened.
According to the company’s warning last week, earnings per share decreased by 21.3% on August 31, 2010. Analysts and investors were sceptical, though it was blamed for a rapidly slowing global economy – primarily because earnings grew 5.5 percent.
On Thursday, FedEx (NYSE: ) confirmed investor and analyst skepticism that it did not cut costs quickly enough to offset the conflict of interest.
FedEx detailed its plan to cut $2.2 billion to $2.7 billion in fiscal 2023, saying “the impact of cost-cutting measures and operating costs remain high relative to demand.”
“We are moving faster and faster to adapt to the effects of declining demand by attracting spending, business and capacity incentives to navigate through a challenging operating environment,” said CEO Raj Subramaniam.
News that the company had plans to cut profit-eroding profits sent shares up 1.1 percent to $154.95 in afternoon trading.
The company said other cost cuts would come from flying fewer FedEx Express flights, reducing variable incentive compensation intended to motivate and retain employees, closing some package distribution centers and delaying certain projects.
The Memphis-Tennessee-based company said operating income for the quarter ended Aug. 31 last year fell to $1.23 billion, or $3.44 per share, from $1.49 billion, or $4.37 per share. Macroeconomic weakness in Asia, service challenges in Europe and softer earnings in the US ground delivery division were blamed for sending shares to their lowest level in 20 years.
Quarterly revenue rose to $23.2 billion from $22 billion a year ago.