Shares of FedEx Corp. fell sharply after the company lowered its full fiscal-year outlook, citing weaker-than-expected shipping demand amid a challenging economic environment.
The package-delivery giant’s stock dropped 11.1% in after-hours trading on Thursday following the announcement.
FedEx, which had recently raised prices for its services, is seeing more customers shift to its cheaper options, further dampening revenue growth. Chief Executive Raj Subramaniam attributed the weakened demand to cautious consumer and business spending, as well as broader economic challenges.
“The magnitude of the Fed rate cut yesterday signals the weakness of the current environment,” Subramaniam said during the company’s earnings call.
The company now expects low single-digit sales growth for fiscal 2025, down from an earlier forecast of low- to mid-single-digit growth. Earnings per share for the full year are expected to be between $20 and $21, a slight reduction from its previous forecast of up to $22.
FedEx reported fiscal first-quarter earnings of $790 million, or $3.60 per share on an adjusted basis, falling short of analysts’ expectations of $4.75 per share. Revenue for the quarter came in at $21.6 billion, slightly below forecasts of $21.87 billion.
As businesses and consumers alike pull back on spending, FedEx has been implementing cost-cutting measures to maintain profitability. The company has laid off staff and reorganized operations in an effort to save billions over the coming years. However, some analysts have raised concerns about how much further the company can trim costs without impacting service quality.
Adding to its challenges, FedEx’s contract with the US Postal Service is set to end this month, which will result in a $500 million hit to its revenue. Despite these setbacks, executives expressed confidence in their ability to manage through the current environment, with plans to continue streamlining operations and adjusting pricing.
CNBC, Market Watch, and Yahoo Finance contributed to this report.
