A person walks past a FedEx truck in New York City, May 9, 2022.
Andrew Kelly | Reuters
FedEx on Thursday announced interest rate hikes and detailed cost-cutting efforts after the shipping giant warned last week that fiscal first-quarter results were hurt by weak global demand.
FedEx shares closed slightly higher on Thursday.
last week, The company’s shares sank After it announced preliminary revenue and earnings less than Wall Street expectations. Chief Executive Officer Raj Subramaniam cited a challenging 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 experienced light volumes in the quarter, citing headwinds in its markets in Europe and Asia. Poor results shocked the market, where Investors have tried to distinguish between market problems and FedEx’s internal shortcomings.
Announcing its full first-quarter results Thursday, the company said that rates for express, ground and home delivery would rise 6.9%. The company said FedEx shipping rates will rise by an average of 6.9%-7.9%.
It also said it believed it would save between $1.5 billion and $1.7 billion through parking planes and reducing flights. Closing some sites, suspending some operations Sunday, and other expense actions will save FedEx Ground between $350 million and $500 million, according to the company.
FedEx said it will save an additional $350 million to $500 million by reducing the use of vendors, deferring projects and closing office sites.
“We are moving with speed and agility to navigate a challenging operating environment, and we are pulling costs, commercial and capacity levers to adapt to the effects of lower demand,” Subramaniam said.
For fiscal year 2023, the company expects total cost savings of between $2.2 billion and $2.27 billion.
Despite its bleak warning last week, FedEx stuck to its 2025 forecast set in June. The company expects annual revenue growth between 4% and 6% and earnings per share growth between 14% and 19%.
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