Warnings of an imminent global recession, revenues at FedEx Express (FX, Memphis International) that are USD500 million short of expectations, and a 15% decline in overall profits at parent FedEx Corp year-on-year blamed on “global volume softness” have sent shares in the American multinational transportation and e-commerce company plunging and sparked a broad sell-off in US stocks.
Business at FedEx Corp worsened towards the end of the first quarter of its financial year, ending August 31, prompting it to withdraw the financial forecast it issued three months ago, saying that a global demand slowdown accelerated at the end of August and will worsen in the next quarter.
In an interview on CNBC on September 15, CEO Raj Subramaniam was asked if he believed the slowdown was a sign of the start of a global recession. He replied: “I think so. You know, these numbers, they don’t portend very well. We’re going fully into cost-management mode.”
FedEx is seeing a decline in cargo volumes in every region around the world, the chief executive said in the interview on the television channel’s programme Mad Money. “I’m very disappointed in the results we just announced here, and you know, the headline really is the macro situation that we’re facing.”
Weakening global shipment volumes drove the disappointing results, he confirmed. FedEx had anticipated demand to increase with Covid-hit factories in China opening back up, yet “week over week over week, that came down.”
“We’re seeing that volume decline in every segment around the world, and [...] the weekly numbers are not looking so good, so we just assume at this point that the economic conditions are not really good. We are a reflection of everybody else’s business, especially the high-value economy in the world.”
FedEx Corp is responding, it said, by cutting capacity by temporarily parking aircraft, reducing hours for staff, delaying some hiring plans, and closing 90 FedEx Office locations as well as five corporate offices. Shares in FedEx plunged 21% on the day after Subramaniam’s comments, the biggest one-day drop in its history.
