FedEx is cutting costs and raising prices after a quarter in which its global package and freight volume dropped 11% year over year, the company announced Thursday (Sept. 22) in its quarterly earnings release.
The company reported that an existing softness in demand was accelerated by worsening macroeconomic conditions during the last weeks of the quarter ended Aug. 31.
“During the first quarter, manufacturing, global trade and consumer spending decelerated, particularly late in the quarter and certainly more than we anticipated,” FedEx Executive Vice President and Chief Customer Officer Brie Carere said Thursday (Sept, 22) during the company’s earnings call.
In response to the weaker-than-expected demand, FedEx is reducing variable incentive compensation, temporarily parking some aircraft, closing some sort operations and offices, suspending some Sunday operations, reducing vendor utilization, deferring projects, optimizing its network and increasing some rates, surcharges and fees.
“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,” FedEx President and CEO Raj Subramaniam said in the release. “As our team continues to work aggressively to address near-term headwinds, we’re meaningfully strengthening our business and customer experience, including delivering an outstanding peak.”
The company had announced some of these measures a week earlier, on Sept. 15, when it released an updated outlook for the quarter.
Read more: FedEx Closes Stores and Grounds Planes as eCommerce Volume Falls
As PYMNTS reported Sept. 19, although FedEx’s news should be taken as shorthand for the general state of the world economy, its struggles aren’t entirely related to the economic slowdown; Amazon, it seems, is making inroads into what has traditionally been FedEx’s turf.
See more: FedEx Woes Show Amazon Gaining Ground in eCommerce, Logistics
During Thursday’s earnings call, FedEx Executive Vice President and Chief Financial Officer Mike Lenz said: “For the remainder of the year, while we are not providing guidance, given current uncertainties, our plan is based on an expectation that the weak trends we saw in late Q1 will persist across our major geographies.”