Transport and logistics

FedEx posts decline in quarterly earnings due to reduced demand for priority services

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FedEx Corporation (NYSE:FDX) reported a decline in first-quarter profit on Thursday, citing muted demand in the package delivery industry, particularly for its high-margin priority services.

The company also revised the upper end of its profit forecast for the fiscal year, reflecting ongoing challenges in the sector.

FedEx shares fell by approximately 11% to $268.21 in after-hours trading following the announcement.

Like other transportation companies, FedEx expanded operations during the pandemic-induced surge in online shopping.

However, with demand normalizing, package delivery firms have been cutting costs by laying off employees, closing offices and sorting facilities, and scaling back operations to preserve margins.

FedEx eliminated $1.8 billion in structural costs during fiscal 2024 and aims to cut another $2.2 billion in fiscal 2025.

Despite these measures, the company acknowledged that cost reductions were not enough to counterbalance the weaker demand for priority services in the U.S., compounded by one fewer operating day in the quarter.

FedEx now expects adjusted operating income for fiscal 2025 to range between $20 and $21 per share, down from its previous estimate of $20 to $22 per share.

The company reported first-quarter earnings of $3.60 per share, a drop from $4.55 per share in the same period last year.

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