FedEx on Thursday posted massively lowered revenue expectations in a preliminary quarterly earnings report, prompting major stock indices to drop and FedEx shares to plummet.
FedEx revised its earnings forecast down by more than $800 million off the back of global challenges, prompting the shipping giant to freeze hiring and close at least 90 FedEx Office locations, according to FedEx’s preliminary quarterly report Thursday. FedEx stock had fallen roughly 21.5% at time of writing, recovering slightly from nearly 24% earlier Friday morning, while all three major stock indices, the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite, all fell at least 1.3% as the market opened, according to The Wall Street Journal.
“Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the U.S.,” CEO Raj Subramaniam said in the quarterly report. “While this performance is disappointing, we are aggressively accelerating cost reduction efforts and evaluating additional measures to enhance productivity, reduce variable costs, and implement structural cost-reduction initiatives.”
FedEx has withdrawn its annual financial guidance after a poor 1Q FY23 quarter, particularly over the last few weeks of August. When the package-delivery giant sneezes, it’s a clear sign the global economy has caught a cold | #OOTT
— Javier Blas (@JavierBlas) September 15, 2022
FedEx was hit particularly hard by “macroeconomic weakness in Asia and service challenges in Europe,” leading the company to lower expectations by $500 million on its FedEx Express service, according to the report. Revenue for FedEx Ground, meanwhile, fell by approximately $300 million from previous forecasts.
Following the weak forecast, Subramaniam spoke on CNBC Thursday and claimed that he believed the economy was entering a recession worldwide. While the company expected demand to increase as Chinese factories reopened following pandemic-related closures, it actually saw demand fall, according to Subramaniam.
“I’m very disappointed in the results that we just announced here, and you know, the headline really is the macro situation that we’re facing,” Subramaniam said. He went on to say “We are a reflection of everybody else’s business, especially the high-value economy in the world.”
Subramaniam’s comments mirror those made by the Federal Reserve last week, with the central bank claiming that the potential for future growth was “generally weak,” and that demand was expected to soften “over the next six to twelve months,” in a Sept. 7 report on the health of the nation’s economy known as the Beige Book. Nearly half of the Fed’s regional banks across the U.S. reported contraction in their local economy.
FedEx declined the Daily Caller News Foundation’s request for comment.
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