FedEx lays off 10% of its officers and directors amid chilling demand
Raj Subramaniam, FedEx Corporation, speaks at the United States Chamber of Commerce Aviation Summit in Washington, DC on March 5, 2020.
Kristoffer Tripplaar | Sipa via AP Images
fedex cuts more than 10% of its executives and directors, CEO Raj Subramaniam announced on Wednesday, as the company cuts corporate jobs to cut costs amid slowing consumer demand.
“Unfortunately, this was a necessary action to become a more efficient and agile organization. It is my responsibility to critically examine the business and determine where we can be stronger by better aligning the size our network based on customer demand,” Subramaniam said in a letter to FedEx team members.
FedEx shares closed more than 4% higher at the end of Wednesday’s trading day.
The layoffs come as shipping momentum slows after the Covid pandemic e-commerce boom.
The parcel and shipping industry has seen a surge during the pandemic amid a surge in online consumer spending. But as inflation has shrunk consumers’ wallets, it has also eaten away at FedEx earnings. Shares of the company have lost about 20% over the past year.
As a result, FedEx had a tough first half and sought to cut costs while raising prices to compensate for slower volumes.
After announcing a fiscal second quarter with declining sales and profits due to lower global volumes, FedEx said it would cut another $1 billion by parking planes and closing some of its offices. In 2022, the company reduced its flight time in the United States and internationally by 13% combined.
During his second-quarter earnings call with analysts, Subramaniam described what he called an “aggressive and decisive plan to reduce costs in fiscal year 2023.” The company aims to cut about $3.7 billion in total this fiscal year.
In addition to cost cutting, FedEx’s path also involved price hikes. The company raised shipping rates by 6.9%, which took effect in January, as another measure to offset a slowdown in consumption. At the time, Subramaniam said he predicted a “global recession”.
FedEx Rival UPS also anticipates “an eventful year”, according to its chief financial officer, Brian Newman. The shipping line on Tuesday reported lower revenue for its fourth quarter as shipping volumes continue to decline. To counter slowing consumer demand, UPS also increased shipping rates by 6.9% late last year.
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