FedEx Feels Recession Is Coming: Shuts Down 90 Offices, Stops New Hiring Across World
Raj Subramaniam, CEO of FedEx said that he has a feeling that the recession is impending for the global economy. He also said that the company is witnessing volume decline in every segment worldwide.
Speaking about the weakened global shipment volumes for the first quarter, he said that Subramaniam, who took over the top job in June, said “I’m very disappointed in the results that we just announced”.
FedEx Plans to Close Stores, Offices
The company said that it is planning to close stores and corporate offices as well as putting the hiring freeze to offset the declining volumes of packages moving around the world.
Subramaniam said that the company would be closing 90 office locations and five corporate offices, deferring new hires, parking some cargo aircraft, and reducing Sunday ground operations. However, he did not say whether the company was contemplating on cutting down the workforce.
The CEO said that the company was expecting the demand to rise after the factories in China reopened, but much to FedEx’s dismay, it did not happen. The company shut down due to COVID-19.
Subramaniam, speaking about whether economy is going to worldwide recession, said that “I think so. But you know, these numbers, they don’t portend very well.”
According to the company the conditions could further weaken in the ongoing quarter amid weaker global volume.
As the per CEO of Memphis based company, the company witnessed weekly declines which reflect the fact that “the economic conditions are not really good.”
Dip in Revenues
For FedEx Ground, the segment mostly handles e-commerce deliveries in the US, revenue fell about $300 million.
FedEx Express saw a decline of $500 million revenue due to the European challenges and weaker economic trends in Asia.
According to FactSet, the company expects revenue to sand at $23.2 billion and earnings per share to be $3.33. This is against Wall Street’s expectations of $23.6 billion in revenue in the first quarter and earnings of $5.14 per share.
After warning investors that profits for its fiscal first-quarter will likely fall short of forecasts because of a dropoff in business, FedEx dropped by 21.2%.
It is also shuttering storefronts and corporate offices and expects business conditions to further weaken.