FedEx shares were on track for their biggest daily drop on record after the company warned on its outlook and said it would close offices, freeze hiring and park aircraft in response to a decline in package shipping volumes.
The update, from a company considered a bellwether of global economic growth because of the wide range of items it ships, was issued after Wall Street’s closing bell on Thursday and included a warning on its earnings in the quarter and the withdrawal of its guidance for fiscal 2023.
FedEx shares were down more than 23 per cent at a 26-month low of $157.40 in morning trading on Friday, putting the company’s stock on track for its biggest one-day drop since listing in 1978.
The warning had an impact on the wider market, with the S&P 500 down 1.5 per cent in early trading. Shares of US-listed rival parcel and logistics companies also fell, with UPS down 4.8 per cent, Amazon falling 4.1 per cent and XPO Logistics sinking 7.4 per cent.
FedEx on Thursday evening released preliminary results for the three months to August 31 that were weaker than analysts had expected, blaming “global volume softness” that “accelerated” in the final weeks of the quarter.
The company, which was officially due to report on September 22, said it expected business conditions to further weaken in the second quarter, prompting it to cut its forecast for capital expenditure and withdraw guidance for the remainder of its fiscal year.
“Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the US,” said chief executive Raj Subramaniam, who took the reins at the company in June from founder Fred Smith. “We are swiftly addressing these headwinds, but given the speed at which conditions shifted, first-quarter results are below our expectations.”
Subramaniam described the performance as “disappointing” and said the company was “aggressively accelerating” efforts to cut costs and enhance productivity.
To help mitigate the effects of reduced demand, FedEx announced it would close more than 90 FedEx Office locations, defer staff hiring, cancel certain projects, reduce flights and temporarily park aircraft, among other actions.
In its preliminary results, FedEx reported a profit of $3.33 a share in its first quarter, down 19 per cent from a year ago and well below the $5.14 a share Wall Street had expected. Revenue increased 5 per cent from a year ago to $23.2bn but was slightly below analysts’ forecast for $23.6bn.
The company said it expected business conditions to further weaken in the current quarter and forecast revenue to be in the range of $23.5bn to $24bn, with earnings of $2.65 “or greater” a share. Wall Street expected revenue of $24.9bn and earnings of $5.39 a share.
FedEx also cut its forecast for capital spending in the fiscal year to $6.3bn from $6.8bn.
Two months ago, rival UPS reaffirmed its outlook for its full year.