FedEx earnings: $1 billion in additional cuts planned with continued low demand
FedEx continues to see decreased demand, highlighting the need for continued cuts, the company announced in its second-quarter earnings Tuesday. FedEx Express, of all the company's segments, has been particularly hard hit.
FedEx made $22.8 billion in revenue for the 2023 fiscal year’s second quarter, down from the year-before quarter’s $23.5 billion. The company posted an adjusted operating income of $1.21 billion, down from last year’s $1.68 billion.
“The FedEx team moved with urgency to make rapid progress on our ongoing transformation while navigating a weaker demand environment,” said FedEx President and CEO Raj Subramaniam. “Our earnings exceeded our expectations in the second quarter driven by the execution and acceleration of our aggressive cost-reduction plans. At the same time, we continue to focus on delivering excellent service for our customers.”
FedEx’s second quarter ended Nov. 30. Tuesday’s report to investors was the first since the company publicly fleshed out its plans to cut costs between $2.2 billion and $2.7 billion this fiscal year following disappointing first quarter earnings.
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Suffering from low volume and high operating costs, the company announced cuts in September to save $1.5 billion to $1.7 billion at FedEx Express, $350 million to $500 million at FedEx Ground and $350 million to $500 million in other overhead expenses.
On Tuesday, FedEx said it has identified another $1 billion that could be cut. In a release, Michael C. Lenz, FedEx executive vice president and chief financial officer, said the company had "an unwavering focus" on cost cutting.
“As we look to the second half of our fiscal year, we are accelerating our progress on cost actions, helping to offset continued global volume softness,” Lenz said.
In a call with investors, FedEx executives said most of the additional cuts would be at FedEx Express and would comprise additional flight reductions as well as changes to ground operations and further clamping down at FedEx's shared services organization.
Executives also said that, as in previous years, they expected third quarter earnings to be lower than second quarter earnings.
FedEx Express, FedEx’s largest unit, made $10.8 billion in revenue for the quarter, down from $11.6 billion the year before. On the earnings call, Brie Carere, executive vice president and chief customer officer, said a part of the revenue decline for FedEx Express was due to volume and yield softness in Europe and Asia. While the FedEx team is watching the loosening of COVID-19 restrictions in China closely, Carere said she did not expect sudden demand changes in that market.
Operating income fell from $949 million to $341 million. Executives said they expected Express to continue to see struggles into the next quarter.
FedEx Ground reported $8.3 billion in revenue versus $8.2 billion the year-before quarter. Its operating income rose from $481 million to $598 million.
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As of Nov. 30, the company's reported cash on hand was $4.6 billion.
FedEx shares were at $163.86 per share at the close of trading Tuesday afternoon. FedEx reported adjusted earnings per share of $3.18.
Corinne S Kennedy covers economic development, real estate and healthcare for The Commercial Appeal. She can be reached via email at Corinne.Kennedy@CommercialAppeal.com
This article originally appeared on Memphis Commercial Appeal: FedEx continues to see low volume, dampening second quarter returns
