FedEx Earnings Fall as Package Shipments Decline Again

On Tuesday, FedEx reported that fewer packages moved through FedEx’s system for the fourth straight quarter. FedEx said the weaker demand was most acute in its Express unit, which provides overnight and international deliveries. Global trade has slowed amid rising interest rates and lower demand. Retailers have said many shoppers have held back purchasing gifts in anticipation of further discounts closer to Christmas.

FedEx said profit fell 24% in the quarter ended Nov. 30, and the company posted a 3% drop in revenue to $22.8 billion. Earnings per share didn’t drop as much as analysts had predicted but revenue was below analysts’ expectations of $23.7 billion, according to FactSet.  

FedEx shares, which have fallen about 36% so far this year, rose about 3% in late trading Tuesday.

FedEx said its efforts to control costs, following the weakening macroeconomic environment, helped it to mitigate declines in package volumes. The company said on Tuesday that it had identified an additional $1 billion in cost savings and lowered its capital spending plans for the fiscal year.

“Express remains where we have the most work to do,” said FedEx Chief Financial Officer

Michael Lenz

on a conference call. The unit parked five aircraft in the second quarter and plans to ground another 11 aircraft in the fiscal second half, said Mr. Lenz.

FedEx has also closed some offices, and furloughed some employees from its freight unit. It is also undertaking longer-term changes to make its delivery networks more efficient.

Executives said in the earnings call that parcel volumes are expected to continue to decline in the fiscal second half, though at a more moderate pace.

The average number of packages FedEx handled daily in the quarter fell 10.2% from the prior year. Shipping volumes at FedEx’s Ground unit, which mostly handles e-commerce deliveries in the U.S., fell 9.1% in the latest quarter.

FedEx is trying to gauge the appropriate level of reining in expenses and capacity as parcel volumes soften. Amid higher inflation, it also needs to find the right prices to charge businesses without alienating them in a choppy economic environment.

FedEx Chief Executive

Raj Subramaniam,

who took over the role from founder

Fred Smith

on June 1, said the company is adjusting to the slowdown in the industrial economy in Europe, as well as changes in the online shopping habits of American consumers as the pandemic wanes.

“The main macro issue in the United States is the e-commerce reset,” said Mr. Subramaniam, adding that e-commerce now makes up 18% or 19% of all retail sales in the country, down from a peak of 22% during the pandemic. It was 16% before the pandemic.

While China has recently loosened Covid-19 restrictions, it is still too early to see any changes in volume from the region, Mr. Subramaniam said.

Even before the holiday season, parcel carriers noted that consumers have pulled back on buying goods online. They resumed spending on travel, parties and entertainment as the pandemic waned. Ample retail inventories have also compelled some companies to pull back on shipments to replenish goods.

FedEx chief customer officer

Brie Carere

said that Ground has performed well in on-time deliveries during the current peak delivery season.

In recent months, analysts say that FedEx has been more aggressive in recovering lost volume from shippers, offering deferred delivery options that are cheaper and services like picture proof of delivery, which retailers say is a sought-after feature. Smaller carriers sometimes struggle to provide picture proof of delivery.

Write to Esther Fung at [email protected]

On Tuesday, FedEx reported that fewer packages moved through FedEx’s system for the fourth straight quarter. FedEx said the weaker demand was most acute in its Express unit, which provides overnight and international deliveries. Global trade has slowed amid rising interest rates and lower demand. Retailers have said many shoppers have held back purchasing gifts in anticipation of further discounts closer to Christmas.

FedEx said profit fell 24% in the quarter ended Nov. 30, and the company posted a 3% drop in revenue to $22.8 billion. Earnings per share didn’t drop as much as analysts had predicted but revenue was below analysts’ expectations of $23.7 billion, according to FactSet.  

FedEx shares, which have fallen about 36% so far this year, rose about 3% in late trading Tuesday.

FedEx said its efforts to control costs, following the weakening macroeconomic environment, helped it to mitigate declines in package volumes. The company said on Tuesday that it had identified an additional $1 billion in cost savings and lowered its capital spending plans for the fiscal year.

“Express remains where we have the most work to do,” said FedEx Chief Financial Officer

Michael Lenz

on a conference call. The unit parked five aircraft in the second quarter and plans to ground another 11 aircraft in the fiscal second half, said Mr. Lenz.

FedEx has also closed some offices, and furloughed some employees from its freight unit. It is also undertaking longer-term changes to make its delivery networks more efficient.

Executives said in the earnings call that parcel volumes are expected to continue to decline in the fiscal second half, though at a more moderate pace.

The average number of packages FedEx handled daily in the quarter fell 10.2% from the prior year. Shipping volumes at FedEx’s Ground unit, which mostly handles e-commerce deliveries in the U.S., fell 9.1% in the latest quarter.

FedEx is trying to gauge the appropriate level of reining in expenses and capacity as parcel volumes soften. Amid higher inflation, it also needs to find the right prices to charge businesses without alienating them in a choppy economic environment.

FedEx Chief Executive

Raj Subramaniam,

who took over the role from founder

Fred Smith

on June 1, said the company is adjusting to the slowdown in the industrial economy in Europe, as well as changes in the online shopping habits of American consumers as the pandemic wanes.

“The main macro issue in the United States is the e-commerce reset,” said Mr. Subramaniam, adding that e-commerce now makes up 18% or 19% of all retail sales in the country, down from a peak of 22% during the pandemic. It was 16% before the pandemic.

While China has recently loosened Covid-19 restrictions, it is still too early to see any changes in volume from the region, Mr. Subramaniam said.

Even before the holiday season, parcel carriers noted that consumers have pulled back on buying goods online. They resumed spending on travel, parties and entertainment as the pandemic waned. Ample retail inventories have also compelled some companies to pull back on shipments to replenish goods.

FedEx chief customer officer

Brie Carere

said that Ground has performed well in on-time deliveries during the current peak delivery season.

In recent months, analysts say that FedEx has been more aggressive in recovering lost volume from shippers, offering deferred delivery options that are cheaper and services like picture proof of delivery, which retailers say is a sought-after feature. Smaller carriers sometimes struggle to provide picture proof of delivery.

Write to Esther Fung at [email protected]