A person walks past a FedEx van in New York City on May 9, 2022.
andrew kelly | Reuters
FedEx on Thursday announced rate hikes and detailed its cost-cutting efforts after the shipping giant warned last week that its fiscal first-quarter results were hit by weakening global demand.
FedEx shares rose about 2% on Thursday afternoon.
Last week, the company’s shares sank after posting preliminary revenue and earnings that fell short of Wall Street expectations. CEO Raj Subramaniam cited a difficult macroeconomic environment and said he expects the economy to enter a “global recession”. The company withdrew its guidance for the year and said it would cut costs.
The shipping giant struggled with light volumes in the quarter, citing headwinds in its markets in Europe and Asia. The poor results shocked the market, as investors tried to distinguish market woes from FedEx’s own internal shortcomings.
In releasing its full first-quarter results on Thursday, the company said its express, ground and home delivery rates would increase an average of 6.9%. Its FedEx Freight rates will increase an average of 6.9% to 7.9%, the company said.
He also said he expects to save between $1.5 billion and $1.7 billion by parking planes and reducing flights. Closing some sites, suspending some Sunday operations and other spending measures will save FedEx Ground between $350 million and $500 million, according to the company.
FedEx said it would save an additional $350 million to $500 million by reducing vendor usage, postponing projects and closing offices.
“We are moving forward with speed and agility to navigate a challenging operating environment, leveraging cost, commercial and capacity levers to adapt to the impacts of reduced demand,” said Raj Subramaniam, President and Chief Operating Officer. management of FedEx Corp.
For its 2023 fiscal year, the company expects total cost savings of $2.2 billion to $2.27 billion.
Despite its dire warning last week, FedEx stuck to its 2025 projections set in June. The company expects annual revenue growth of between 4% and 6% and earnings per share growth of between 14% and 19%.