FedEx reported lower-than-expected first-quarter earnings on Tuesday, signaling a need to reduce operating costs in FedEx Express to match demand. The company announced in August that it would unveil a restructuring program in October including a voluntary buyout for some employees.
"As we announced on September 4th, a weakness in the global economy constrained revenue growth at FedEx Express during our first quarter and affected our earnings," said FedEx chairman and CEO Fred Smith in a press release. "Meanwhile, our FedEx Ground and FedEx Freight segments performed well, with both improving their year-over-year operating margins. We are taking further actions to reduce costs and adjust our networks to match current and anticipated shipment volumes."
FedEx reported revenue of $10.79 billion, up 3% from the previous year; operating income of $742 million, up 1% from last year; operating margin of 6.9 %, down from 7% last year; and net income of $459 million, down 1% from last year. It projects reduced second-quarter earnings compared to last year.
"Earnings for the first quarter were below our expectations as weak global economic conditions dampened revenue growth, drove a shift by our customers to our deferred services and outpaced our near-term ability to reduce FedEx Express operating costs," said Alan Graf, chief financial officer. "We plan to provide additional information on our forecast and long-term opportunities at our investors and lenders meeting on October 9-10 in Memphis."
FedEx employs thousands of Memphis-area residents at its FedEx Express World Headquarters on Hack Cross and other facilities in Shelby County. Its Memphis-area workforce is about 30,000.