FedEx Corp. warned Thursday it will likely miss Wall Street’s first-quarter profit target and said it expects business conditions to further weaken in its fiscal second quarter amid weaker global volume.
The Memphis, Tennessee-based package delivery company also scrapped its forecast for fiscal 2023 earnings, which it issued less than three months ago.
For the three months ended August 31, FedEx projected adjusted earnings per share of $3.44 and $23.2 billion in revenue. That’s below analysts’ consensus forecast of $5.14 adjusted earnings per share and $23.6 billion in revenue, according to FactSet.
“Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the U.S.,” FedEx CEO Raj Subramaniam said in a statement. “We are swiftly addressing these headwinds, but given the speed at which conditions shifted, first-quarter results are below our expectations.”
The company’s FedEx Express business was particularly hurt by service challenges in Europe and weaker economic trends in Asia, which led to a roughly $500 million revenue shortfall for the segment. FedEx Ground revenue, meanwhile, came in about $300 million below the company’s forecasts.
High operating expenses were also a drag on the company’s results, FedEx said.
In response, FedEx said it will aggressively cut costs by closing over 90 FedEx Office locations and five corporate offices, deferring new hires, and operating fewer flights.
FedEx did not say where the closures will happen or what impact they will have on the number of flights moved through Memphis International Airport.
Subramaniam noted that he remains confident FedEx will achieve its fiscal year 2025 financial targets.
For the current quarter, which ends in November, FedEx expects revenue to range between $23.5 billion and $24 billion, and adjusted earnings per share of at least $2.75. Wall Street analysts had expected adjusted earnings per share of $5.48 and $24.86 billion in revenue, according to FactSet.
The company still plans to buy back $1.5 billion of FedEx common stock in fiscal 2023. The company expects to buy back $1 billion of FedEx common stock during the second quarter.
Shares in FedEx sank 16.3% in after-hours trading Thursday following the release of its preliminary results and outlook. The shares ended regular trading down 0.1% and are down 20.8% so far this year.