FedEx closes offices, parks aircraft after poor quarterly earnings report

MEMPHIS, Tenn. (WMC) - After FedEx Corp. provided its preliminary first quarter financial results on Thursday, the company announced that it is initiating several cost-cutting initiatives to offset a declined volume of packages which dropped its quarterly revenue below expectations.

FedEx provided its quarterly results on Thursday which showed that results for 2023′s first quarter ending Aug. 31 were adversely impacted by global volume softness that accelerated in the final weeks of the quarter.

This led to a revenue shortfall of approximately $500 million for FedEx Express, and a shortfall of approximately $300 million for FedEx Ground relative to the company’s forecasts.

FedEx President and CEO Raj Subramaniam announced on Thursday that the company is taking action to reduce costs to offset the falling demand.

“While this performance is disappointing, we are aggressively accelerating cost reduction efforts and evaluating additional measures to enhance productivity, reduce variable costs, and implement structural cost-reduction initiatives,” Subramaniam said. “These efforts are aligned with the strategy we outlined in June, and I remain confident in achieving our fiscal year 2025 financial targets.”

These cost-cutting initiatives include:

Reduction in flight frequencies and temporarily parking aircraft
Volume-related reductions in labor hours and other linehaul expenses
Consolidation of certain sort operations to drive productivity
Reduction of Sunday operations at a number of FedEx Ground locations
Cancellation of certain planned network capacity and other projects
Deferral of staff hiring
Closure of over 90 FedEx Office locations
Identification of five corporate office facilities to be closed, with additional real estate rationalization planning underway

After the warning was issued Thursday, FedEx shares dropped 13% after markets closed.

The company said that it expects business conditions to further weaken in the second quarter. In addition, anticipated capital spending for the 2023 fiscal year has been revised to $6.3 billion, as opposed to the prior forecast of $6.8 billion.

FedEx is also withdrawing its fiscal year 2023 earnings forecast due to expectations of a continued volatile operating environment.

The company plans to provide additional details on cost initiatives and an updated outlook during its upcoming earnings call scheduled for 4:30 p.m. on Sept. 22.

It is currently unclear how the company’s cost-cutting will affect Memphis.

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