June 20 (Reuters) – FedEx (FDX.N), which is cutting costs to protect profits as demand eases, said on Tuesday that ongoing “demand challenges” prompted its plans to ground an additional 29 planes in the fiscal year that began on June 1 .
The global shipping downturn has eroded the industry’s margins and the challenge for FedEx is to match costs and capacity with lower demand.
E-commerce was particularly hard hit as the pandemic-driven online shopping bubble burst as consumers returned to the stores, went back to eating at restaurants and started traveling again.
FedEx CEO Raj Subramaniam said on a conference call with analysts that the new cost-cutting measures would support continued earnings improvement in the current fiscal year 2024 “due to an environment that we expect will continue to be characterized by demand challenges, particularly in the first half.”
The first half of FedEx’s fiscal year runs through November.
Last fiscal year, FedEx cut 29,000 jobs, shut down 18 planes, closed offices and cut profit-cutting Sunday deliveries in an effort to cut $4 billion in ongoing costs by the end of fiscal year 2025.
Shares of the company fell 2.7% in extended trading Tuesday after FedEx posted adjusted earnings of $4.94 per share for the fourth quarter ended May 31, compared to $6.87 per share a year earlier.
Its flagship Express, which relies on airplanes to get packages to recipients quickly, reported weakness in the last quarter due to weaker demand and customers switching to slower and cheaper transportation options, though executives said margins in that company would improve.
For fiscal 2024, FedEx forecasts flat to low-single-digit revenue growth over the prior year. That would put the range of adjusted earnings, excluding items, at $16.50 to $18.50 per share.
The company said it would repurchase $2 million of its common stock in the new fiscal year.
It also said Chief Financial Officer Michael Lenz would retire effective July 31. He will remain a senior advisor to the company until December 31.
Reporting by Priyamvada C in Bengaluru and Lisa Baertlein in Los Angeles; Edited by Matthew Lewis, Cynthia Osterman and Jamie Freed