On Thursday, FedEx made big cost-cutting announcements in response to what it described as a slowdown in the volume of shipments across the globe. It also removed its full-year projection.
“Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the U.S.,” Raj Subramaniam, the CEO, said in the press announcement. “While this performance is disappointing, we are aggressively accelerating cost reduction efforts.”
Subramaniam stated in an interview with Jim Cramer on Mad Money on CNBC that he anticipates a “worldwide recession” to start in the economy.
FedEx would eliminate 90 office locations, five corporate office buildings, put off hiring plans, restrict flights, and cancel projects in order to reduce expenses.
In Thursday’s extended trading, FedEx stock decreased by roughly 12%.
The changes follow first-quarter profits that notably underperformed Wall Street expectations. Even though the company was planned to release the report’s conclusions and hold an executive conference call the next week, it was released earlier than expected.
According to consensus estimates provided by Refinitiv, FedEx performed as follows during the quarter that ended on August 31:
- Adjusted earnings per share were $3.44 versus the projected $5.14.
- Revenue was $23.2 billion compared to the expected $23.59 billion.
In response to the performance, FedEx withdrew its June full-year projection, citing an unpredictable climate that rendered forecasts unachievable. The company made a $500 million reduction to its $6.3 billion annual capital spending forecast.
The company attributed its bad first-quarter results on a number of shortcomings in Asia as well as service problems in Europe. Although these variables decreased the volume of shipping, the company insisted that operational costs were still considerable. FedEx reported an adjusted operating income of $1.23 billion.
The company anticipates revenue between $23.5 billion and $24 billion for the second quarter of its fiscal year, with adjusted earnings per share of at least $2.75. According to Refinitiv, Wall Street analysts anticipated Q2 EPS of $5.48 and revenue of $24.86 billion.