FedEx stunned Wall Street analysts on Thursday by ditching its earnings forecast for the current fiscal year.
“Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the US,” FedEx CEO Raj Subramaniam said in a statement.
He added, “We are swiftly addressing these headwinds, but given the speed at which conditions shifted, first-quarter results are below our expectations.”
The company is planning to cut costs by closing over 90 FedEx Office locations and five corporate offices, pausing new hiring and operating fewer flights.
Satish Jindel, CEO of ShipMatrix, said FedEx needs to cut much deeper than the cost-savings initiatives it announced on Thursday.
Jindel told FreightWave, a global supply chain market intelligence outfit, that the cost-cutting solutions put forward by FedEx were like “putting a Band-Aid on the situation when it needs surgery. It’s not enough and it will take a long time.”
One Boston-based Wall Street analyst claimed that FedEx has focused too much on boosting revenue, “and not enough on cost-cutting initiatives such as slashing its bloated marketing and advertising budgets, which would include the massive deal it signed with the PGA Tour in 2017.”
He added, “I’m hearing there is a lot of pressure on Subramaniam to end the PGA Tour deal. It’s a really bad look to have Rory McIlroy cashing FedEx checks for $20 million while it lays off drivers making 20 bucks an hour.”
Wall Street analysts were promised that FedEx executives would provide more details on the new cost-cutting measures and an updated outlook in the company’s earnings call on Sept. 22 at 4:30 pm CT.