FedEx to scale down operations after warning of sales shortfall

FedEx Corp said its quarterly revenue fell below its expectations and it was parking aircraft and closing offices to offset declining volumes of packaging moving around the world.

Chief Executive Raj Subramaniam, who took over in June 2022, said he was taking actions to reduce costs including closing 90 FedEx Office locations, freezing hiring, reducing Sunday ground operations, parking some cargo aircraft, and closing five corporate offices, FedEx didn’t say if it cutting its workforce.

FedEx has faced pressure from an activist investor to boost its profitability and also faced calls from some contractors that handle its ground packages to help them with higher labor and fuel costs.

The Memphis, Tennessee-based firm said results from its largest unit, Express, were curbed by service challenges in Europe and macroeconomic weakness in Asia. That led to a revenue shortfall of about $500 million compared with the firm’s forecast.

Revenue at FedEx Ground, which primarily handles e-commerce deliveries in the US, was nearly $300 million below its forecasts.

The firm said it was withdrawing its full-year financial forecasts issued in June. For the second quarter of 2022, the firm forecasts revenue between $23.5 billion to $24 billion. In June 2022, FedEx said it was focused on improving profit margins and streamlining its operations, even as costs from wages and fuels have risen.

Package volume has been declining after the pandemic-fueled boom in online shopping has subsided.