FedEx To Close Locations And Trim Service After Lackluster Quarter
FedEx Corp. will close over 90 of its office locations, as well as five yet-to-be-identified corporate offices, with plans for additional real estate closures underway. The company is also going to idle some of its cargo aircraft and reduce Sunday ground operations.
The company did not, however, say that it was planning to cut staff.
The closures and other moves come in response to quarterly revenue figures that were below expectations, with FedEx business displaying weaknesses worldwide due to a slump in package deliveries following the pandemic-era boom.
The global economic climate isn't helping either, according to comments made by FedEx CEO Raj Subramaniam on CNBC Thursday. Asked if he believes the economy is headed into a worldwide recession, Subramaniam responded:
"I think so. But you know, these numbers, they don’t portend very well."
FedEx results in particular were hurt by FedEx Ground, which largely handles e-commerce deliveries in the United States. The division took in revenue about $300M below company forecasts.
There was also sluggishness in Asia and service challenges in Europe, leading to a revenue shortfall in that part of its business of about $500M, relative to company forecasts.
“People are buying less. They are paying more for air travel and other experiences,” SJ Consulting Group President Satish Jindel told The Wall Street Journal.
The company reported on Thursday that its results for the quarter ended Aug. 31 were "adversely impacted by global volume softness that accelerated in the final weeks of the quarter."
"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. “While this performance is disappointing, we are aggressively accelerating cost reduction efforts."
Investors headed for the door on word of the company's poor showing. FedEx stock dropped more than 22% on Friday morning. Company shares are down more than 38% since this time last year.
UPDATE, SEPT. 15, 1:09 P.M. ET: This story has been updated to include FedEx CEO Raj Subramaniam's comments during a CNBC broadcast on Sept. 14.