FedEx announces further cost cuts amid weak demand, lower profits

On December 20, FedEx announced its consolidated results for the second quarter of fiscal year 2023 as of November 30.

The performance report shows that the company’s total revenue in the second quarter of fiscal year 2023 was US.8 billion, a year-on-year decrease of 3%;Net profit was US5 million, a year-on-year decrease of 37.3%.

"The FedEx team urgently needs to make rapid progress in our ongoing transformation while navigating a weak demand environment," said Raj Subramaniam, FedEx President and CEO. Quarterly earnings beat expectations."

The company said it was prioritizing actions to reduce costs quickly to bring costs into line with lower-than-anticipated business volumes in fiscal 2023. The company has identified an additional billion in cost savings on top of the September plan. As a result, the company now expects to cut costs by about .7 billion in fiscal 2023.

FedEx said in its earnings report that the second quarter of fiscal 2023Performance was constrained by continued weak demand, especially in the FedEx Express segment.

Operating income in the FedEx Express segment fell 64% year-over-year due to lower global freight volumes, partially offset by an 8% increase in package volume. The segment implemented previously planned cost-cutting actions during the quarter to mitigate the impact of lower volumes, including structural network changes and the temporary grounding of aircraft.

FedEx Ground segment operating income rose 24% year-over-year, primarily due to volume growth of 13% and cost-cutting measures. These factors were partially offset by increased purchase shipping charges, lower package volumes and higher other operating expenses.

FedEx Freight segment operating income rose 32% year-over-year, driven by 18% volume growth, partially offset by higher wages and employee benefits and lower shipments. Separately, the department temporarily furloughed some drivers until early March to match capacity and costs with reduced demand.

In late September this year, the company said that international air cargo activity was significantly weaker, especially from Asia. At the time, the company reported fiscal first-quarter results that were well below expectations and said it would cut costs.