FedEx hikes package rates, details cost cutting as demand weakens globally

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  • The company said its rates for express delivery, ground delivery and home delivery will increase by an average of 6.9%.
  • In fiscal year 2023, the company expects total cost savings of between $2.2 billion and $2.27 billion.
  • The company’s shares fell last week after it reported preliminary earnings and earnings that fell short of Wall Street’s expectations.

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FedEx on Thursday announced a rate hike and detailed its cost-cutting efforts after the shipping giant warned last week that its first-quarter financial results were hit by weakening global demand.

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FedEx shares closed slightly higher after an earnings announcement that was inadvertently released prior to the bell. “The early earnings report was a technical problem, not a deliberate one,” a company spokesman said.

The company’s shares fell last week after it reported preliminary earnings and earnings that fell short of Wall Street’s expectations. CEO Raj Subramaniam cited the difficult 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.

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The shipping giant struggled with low volumes in the quarter, citing headwinds in its European and Asian markets. The poor results shocked the market as investors struggled to distinguish market problems from FedEx’s own internal weaknesses.

Publishing its full first-quarter results on Thursday, the company said its rates for express, ground and home delivery will increase by an average of 6.9%. FedEx Freight rates will increase by an average of 6.9-7.9%, the company said.

He also said he hopes to save between $1.5 billion and $1.7 billion by parking planes and reducing flights. Closing certain locations, suspending some Sunday operations, and other cost actions will save FedEx Ground between $350 million and $500 million, according to the company.

FedEx said it would save an additional $350 million to $500 million by reducing the use of suppliers, deferring projects and closing offices.

“We are moving quickly and flexibly to navigate a challenging operating environment, leveraging cost, commercial and manufacturing capacity to adjust to the impact of lower demand,” Subramaniam said.

In fiscal year 2023, the company expects total cost savings of between $2.2 billion and $2.27 billion.

Despite its grim warning last week, FedEx is sticking to its 2025 guidance set out in June. The company expects annual revenue growth of 4% to 6%, and earnings per share growth of 14% to 19%.

Credit: www.cnbc.com /

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