FedEx warns of global recession, cuts sales forecast by $500 million

shares of fedex (FDX) It plunged 22% in early trading Friday after opening after warning late Thursday that it would fall short of its earnings target by $500 million due to a slowing economy. A weakening global economy, especially in Asia and Europe, is hurting FedEx’s express delivery business. Demand for packages weakened significantly in the last few weeks of the quarter, according to the company.

In an interview on CNBC on Thursday, FedEx CEO Raj Subramaniam was asked if he thought the slowdown in his business was a sign of the beginning of a global recession.

He said the volume of shipments handled by FedEx is declining in all regions of the world. He said US consumers are to some extent protected by the strong dollar, which is increasing purchasing power, but said FedEx is also seeing a slowdown in US spending.

The company said it was responding by reducing flights and temporarily parking aircraft, reducing staff hours, postponing some hiring plans, and closing 90 FedEx offices and five corporate offices. . He also cut $500 million from the capital spending budget for the fiscal year ending May 2023, cutting that spending to $6.3 billion.

“We’re in full cost control mode,” he told CNBC.

FedEx has significantly lowered its guidance for the quarter, but said it was withdrawing its full-year guidance issued in June “due to the continued volatile business environment.

FedEx Ground service, the company’s primary method of handling the delivery of online purchases by U.S. consumers, fell short of its sales target by $300 million.

FedEx claims to work with contractors who have problems. It sued its former contractor, which has been the company’s most vocal critic.

In a statement last month, FedEx Ground said, “We recognize that the current economic climate presents new challenges. We remain committed to addressing challenges and our goal is to enable both FedEx Ground and service providers to succeed.”

Approximately 1,000 of the 6,000 contractors who work for FedEx join trade associations to lobby the company for better compensation.

A survey conducted by the association released this week found that 54% said they were losing money trading with FedEx, 35% said they were breaking even, and just 11% said they were profitable. did. The survey reached 1,200 of his contractors who either work for the company or have left the company within the past 12 months, the association said.