FedEx In its quarterly earnings call on Tuesday it said it would cut $1 billion in costs after weak demand.
In September the company announced cost-cutting measures, including grounding flights and closing some offices in the face of softening global demand. It also woke up Package-distribution rates. At the time, CEO Raj Subramaniam warned that the economy would enter a “global recession”.
FedEx said Tuesday it could cut $1 billion more than it forecast in September, bringing total savings for fiscal 2023 to $3.7 billion, compared with its previous projection for the year.
“Our teams are unwaveringly focused on quickly implementing cost savings to improve profitability,” CFO Mike Lenz said in an earnings release. “Looking into the second half of our fiscal year, we are accelerating our progress on cost measures, helping to offset continued global volume softness.”
Most of the additional cuts will come from FedEx’s express unit, as will additional flight cuts, Lenz said on the earnings call. Other cuts include adjustments to the ground unit at pick-up and delivery.
The company has cut U.S. domestic flight hours by 6% and international flights by 7% so far this year. By the end of the fiscal year, FedEx said it expects to ground 11 additional flights.
FedEx shares were up more than 3% in after-hours trading.
Here’s how FedEx performed in the second quarter of fiscal 2023 compared to Refinitiv consensus estimates:
- Stock Gains: $3.18 adjusted and $2.82 expected
- Revenue: $22.8 billion and $23.74 billion expected
FedEx’s net income fell to $788 million in the three months ended Nov. 30, down from $1.04 billion a year earlier. Sales fell to $22.8 billion in the period, down from $23.5 billion a year earlier.
Adjusting for one-time items, FedEx reported earnings of $3.18 per share, ahead of analyst estimates of $4.83 per share it reported in the same period last year.
The company reported particular weakness in its express division, where operating income fell 64% from last year. FedEx Ground operating income increased 24% year-over-year, and FedEx Cargo operating income increased 32% year-over-year. All three units were helped by higher yields.
FedEx forecast full-year earnings per share of between $13 and $14, compared with analysts’ expectations of $14.08 per share.
The company’s shares were down about 36% for the year through Tuesday’s close, compared with a roughly 20% decline in the S&P 500.