FedEx mostly attributed the lower guidance to a slowdown in volume. After online shopping demand surged during the pandemic, consumers around the world shifted their spending habits to focus more on services such as travel and concerts. Subramaniam said he thinks the challenges will persist.
There are other secular issues hitting the company, too. FedEx raised wages amid Covid-19, when delivery people were putting in overtime to get toilet paper and hand sanitizer onto doorsteps. Although FedEx plans to trim working hours, defer hiring and reduce flights to , those measures cannot keep up with the steep decline in revenue. Other factors, such as high fuel costs, are also largely beyond its control, as are retail supply chains that gum up restocking efforts and create inventory gluts.Bad quarters happen to the best of companies. The problem is that FedEx’s own management seems to have been taken by surprise. Abandoning financial projections that were only three months old might make sense when there’s a sudden shock, like the one that started 2020.
Even typically credulous analysts sound annoyed. Deutsche Bank’s said the “simply staggering” warning was a mystery even after speaking to the company. Subramaniam alone cannot be blamed. Founder Frederick Smith is presiding as executive chairman after Subramaniam ascended to be chief executive in June. Today’s macroeconomic obstacles may have been unimaginable just a few years ago, but the benefits of a combined eight decades of experience atop FedEx are getting lost in the mail.
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Source: CNBC - 🏆 12. / 72 Read more »