- FedEx released its 2019 Q2 earnings report today.
- FedEx won’t achieve its operating income goals by fiscal 2020, the company said today.
- It’s also going to start offering buyouts to eligible employees along with other cost-cutting measures.
- Executives attributed the “weakened” business to economic slowdowns in Europe and Asia.
FedEx Express’ goal of achieving an operating income of $US1.5 billion by fiscal 2020 won’t be achieved, the company said in its earnings report on Tuesday.
The Memphis, Tennessee-based company also dropped its 2019 earnings guidance to $US15.50 to $US16.60 per share. Previously, the company forecasted $US17.20 to $US17.80 a share. In after-hours trading, FedEx shares dropped by 6%.
“Global trade has slowed in recent months and leading indicators point to ongoing deceleration in global trade near-term,” said Alan Graf, FedEx executive vice president and chief financial officer, in the report. “These trends, coupled with the change in service mix at FedEx Express, are negatively impacting the segment’s financial results.”
In a call to investors on Tuesday, FedEx executives highlighted economic troubles in Europe as a key reason for the company’s lowered expectations. Express package volume has been lower than expected in the region.
Graf said, because of that, FedEx will cut costs and “focus on increasing efficiency across the organisation.”
While executives underlined FedEx’s “record-setting holiday season” in the US, American employees may see some of the effects of that cost-cutting. FedEx will offer “a voluntary buyout program” to its US employees that’s expected to save the company $US225 million to $US275 million.
Other initiatives include limiting hiring, reducing discretionary spending, and reducing international network capacity.
These mediocre earnings come after the December 10 resignation of David Cunningham, previously the head of FedEx Express. Cunningham left the role after just two years, while his predecessor led the air freight division for 17 years. The sudden departure concerned investors and analysts, who called it “out of character.”
FedEx CEO Fred Smith praised Cunningham’s 30-year tenure at FedEx in the investor call on Tuesday, calling the departure a retirement.
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