The Memphis-based delivery giant saw its shares drop by nearly 11%, to $267.74, in after-hours trading. The announcement also impacted rival United Parcel Service (UPS), whose shares fell by 2.5%.
FedEx, alongside UPS, is facing pressure from the increasing demand for lower-cost deliveries. While UPS attributed this to a surge in volume from Chinese e-commerce platforms such as Temu and Shein, FedEx pointed to a fall in high-priority shipments between businesses, which has dented its most profitable segment.
Chief Executive Raj Subramaniam acknowledged that industrial demand was weaker than expected, affecting shipments between manufacturers and other companies. These shipments are a key indicator of the health of the broader US economy, and FedEx is often regarded as a bellwether for economic conditions.
“The scale of the Federal Reserve’s recent interest rate cuts underscores the challenges of the current economic environment,” Subramaniam remarked, referring to the Fed’s decision to reduce rates by half a percentage point earlier this week.
Subramaniam is overseeing a major restructuring of the company, which includes significant cost-cutting measures and the merger of its Ground and Express divisions. Despite these efforts, the reduced demand for priority services and the impact of one fewer operating day in the latest quarter weighed heavily on performance.
FedEx now forecasts revenue growth for fiscal 2025 to be in the low single digits, down from its earlier prediction of low-to-mid single-digit growth. It also reduced the upper range of its full-year adjusted operating income guidance, now expecting earnings of between $20 and $21 per share, compared to its previous estimate of $20 to $22 per share.
On an adjusted basis, FedEx’s profit fell to $3.60 per share, down from $4.55 per share in the same period last year.
The company is also preparing for the loss of a key contract with the United States Postal Service (USPS), its largest customer. The air transport contract, which generated $1.75 billion in revenue for FedEx during the USPS’s last fiscal year, will conclude on 29 September. FedEx expects a $500 million hit from this in the current fiscal year, as UPS has secured the business.
In addition, FedEx executives are evaluating options for its FedEx Freight division, which may include a sale or spin-off.
