FedEx outlines cost-cutting plan after profit miss By Reuters

By Lisa Baertlein and Nathan Gomes

(Reuters) -FedEx Corp on Thursday outlined cost cuts of up to $2.7 billion from parking planes, suspending some Sunday deliveries and shuttering corporate offices after falling demand hammered first-quarter profits.

The company reported that earnings per share fell 21.3% for the quarter ended Aug. 31, in line with the warning it delivered last week. It blamed a rapidly deteriorating global economy, but analysts and investors were skeptical – in large part because revenue increased 5.5%.

On Thursday, FedEx (NYSE:) on confirmed investors’ and analysts’ suspicion that it did not cut costs fast enough to offset the hit to demand.

“The impact of cost actions lagged volume declines and operating expenses remained high relative to demand,” FedEx said in a release detailing its plans to cut costs by $2.2 billion to $2.7 billion in fiscal 2023.

“We’re moving with speed and agility to navigate a difficult operating environment, pulling cost, commercial, and capacity levers to adjust to the impacts of reduced demand,” said Chief Executive Raj Subramaniam.

News that the company had plans for reducing profit-eroding excess capacity sent shares up 1.1% to $154.95 in afternoon trading.

The company said other expense reductions would come from flying fewer FedEx Express flights, reducing variable incentive compensation meant to motivate and retain workers, closing certain package sorting centers, and delaying certain projects.

The Memphis-Tennessee-based company said adjusted operating income for the quarter ended Aug 31 fell to $1.23 billion, or $3.44 per share, from $1.49 billion, or $4.37 per share, the year earlier. It blamed macroeconomic weakness in Asia, service challenges in Europe and soft revenue in its U.S. Ground delivery unit for the results that sent shares skidding to the lowest levels in 20 years.

Revenue for quarter rose to $23.2 billion from $22 billion a year earlier.