FedEx warns of economic downturn and cuts forecasts.Shares down 16%

A FedEx employee sorts a package in Manhattan, New York City, USA, May 9, 2022. REUTERS/Andrew Kelly

SEPTEMBER 15 (Reuters) – FedEx on Wednesday retracted financial forecasts issued just three months ago, saying a slowdown in global demand accelerated at the end of August and is on pace to worsen in the November quarter. .

Shares of the global shipping company fell more than 16% after it also reported earnings and profits for the first quarter ended Aug. 31, when it missed Wall Street targets. S&P 500 futures fell on Thursday as FedEx increased worries about a slowdown in the global economy.read more

Overall, the slowdown in global economic activity reduced FedEx Express revenue by $500 million and FedEx Ground revenue by $300 million in the fourth quarter, FedEx said.

FedEx said it is cutting costs, including closing some FedEx offices, reducing working hours and consolidating some sorting facilities.

The alarm comes as consumers around the world struggle with high costs for essentials such as food, fuel and housing, while trying to shift their spending away from e-commerce to in-person shopping, dining and travel. I’m here.

The World Bank said on Thursday that the world’s three largest economies – the United States, China and the euro area – are in a sharp slowdown, and “even a modest hit to the global economy next year could plunge it into recession.” Stated.

Some experts said FedEx should have caught the wind of cooling demand sooner. US port authorities hinted at a slowdown in imports, especially after Amazon said it was building too many warehouses, and consumer discretionary spending continued to struggle because of inflation.read more

“They should have seen this a month ago,” said Satish Jindel, an industry consultant who helped launch and scale the company that became FedEx Ground.

FedEx overestimated demand during the peak holiday season last year, drawing complaints from independent contractors who paid for unnecessary trucks and workers.

read more

Shippers such as FedEx and UPS have imposed various surcharges during the pandemic, from fuel to special handling, and these profit-boosting charges are at risk, Jindel said. I’m here.

Climate ‘challenging’

FedEx said Thursday that its business has been hit by service challenges in Europe and macroeconomic issues in Asia. China, the region’s largest economy, is grappling with COVID-19 lockdowns and heat wave power outages.

The warning has dragged shares of competing shipping companies and retailers down in long-term trading. United Parcel Service (UPS.N) is down 5% and Amazon (AMZN.O) is down 1.9%.

According to Refinitiv IBES, FedEx expects to report revenue of $23.2 billion in the first quarter, below analyst expectations of $23.59 billion. Adjusted earnings are expected for him at $3.44 per share, well below expectations of $5.14.

The company withdrew its full-year earnings forecast.

Cowen analyst Helene Becker said the wide gap between FedEx’s results and Wall Street’s forecasts came as analysts had already revised their estimates for the fourth quarter, which was released in June. He added that the company’s stock has lost about 10% of its value since announcing the now-withdrawal forecast published on . .

And the warning is likely to put pressure on Raj Subramaniam, FedEx’s new chief executive, to close the profitability gap with UPS.

In a statement, Subramaniam said: “Global trading volumes declined as macroeconomic trends deteriorated significantly in the second half of the quarter, both internationally and in the United States. “Given the speed at which we move, our first quarter results are below expectations.” .

Reporting by Nathan Gomez and Sharik Khan from Bengaluru and Lisa Bartrain from Los Angeles.Editing by Peter Henderson and Christopher Cushing

Our standards: Thomson Reuters Trust Principles.