FedEx scales back operations following disappointing Q1 2022 results
16 / 09 / 2022
A drop in volumes and economic volatility “adversely impacted” FedEx’s results for the fiscal first quarter ended August 31, prompting the transport company to implement cost reduction initiatives.
The company expects business conditions to weaken further in the second quarter.
While revenue figures were up on last year, the company said they fell below forecasts and it was this shortfall that meant the company needed to take action.
FedEx Express results were particularly impacted by macroeconomic weakness in Asia and service challenges in Europe, leading to a revenue shortfall in this segment of approximately $500m relative to company forecasts.
FedEx Ground revenue was approximately $300m below company forecasts.
To tackle reduced demand in fiscal 2023, the FexEx said it would undertake cost reduction initiatives including cancellation of certain planned network capacity and other projects; reducing flight frequencies and temporarily parking aircraft; closure of over 90 FedEx Office locations; and deferral of staff hiring, among other actions.
The transport company reports fiscal 2023 first-quarter revenue of $23.2bn, slightly higher than fiscal 2022’s first-quarter results of $22bn.
FedEx Express revenue is $11.1bn for the first quarter 2023, compared to $11bn for the first quarter of fiscal 2022. FedEx Ground revenue is $8.2bn compared to $7.7bn and FedEx Freight revenue is $2.7bn, compared to $2.3bn.
“First quarter results were adversely impacted by global volume softness that accelerated in the final weeks of the quarter,” said FedEx in a press release.
“FedEx Express results were particularly impacted by macroeconomic weakness in Asia and service challenges in Europe, leading to a revenue shortfall in this segment of approximately $500 million relative to company forecasts. FedEx Ground revenue was approximately $300 million below company forecasts.”
FedEx president and chief executive Raj Subramaniam said: “Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the U.S. We are swiftly addressing these headwinds, but given the speed at which conditions shifted, first quarter results are below our expectations.
“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.”
IATA World Air Transport Statistics (WATS) 2021 data showed FedEx retained its position as the top cargo airline in 2021, albeit with a lower growth level than many of the other top-performing airlines.