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Fed wx com3/24/2023 And fearing the delays of last year, many had items shipped early. "We are confident in our ability to deliver this holiday season," the company said.īut retailers are expecting muted holiday sales. In a statement, FedEx said the cost-cutting actions it announced last week aren't expected to impact service. Regardless of the factors driving FedEx's troubles, the upcoming holiday season likely won't bring any relief. That comes as FedEx reports lower-than-expected business with top clients Target and Walmart, which have both grappled with excess inventory in recent months.įedEx reported strong freight margins, but Hoexter noted that the category is "more manufacturing-weighted, which hasn't felt as big of a brunt." If demand continues to slow and manufacturers require less production, Hoexter said FedEx could start to see freight volumes soften, too. Hoexter's biweekly truck shipper survey has reported 11 straight periods in "recession range" according to a Bank of America Global Research report. Ground service, which came in $300 million short of the company's forecasts, is the next to feel a slowdown: "When the consumer stops buying, the stores start seeing shelves filled, you stop replenishing those inventories," Hoexter said. He said small declines in volume significantly impact margins because air delivery costs so much to maintain. But obviously FedEx is a bellwether and we don't want to dismiss what they're saying," said Moody's Kanarek.īank of America's Hoexter sees the performance of the express category, which came in $500 million below FedEx's own expectations, as the first indicator of a broader downturn. "We really haven't seen evidence of a broad-based slowdown. A bellwether?Īnalysts note that FedEx's ground and express delivery are nevertheless vulnerable to global economic conditions, and that the disappointing performance of the categories could reflect a recessionary environment. Meanwhile, UPS will be hiring more than 100,000 seasonal employees for the holiday period. "UPS is two to three years ahead of FedEx in terms of the way they're looking at post Covid margins," said Capital Wealth's Kevin Simpson on "Closing Bell: Overtime." "It's almost like FedEx didn't think the environment would ever go back to normal."Īs part of its cost-cutting efforts, FedEx said it will reduce some ground operations and defer hiring. In its most recent earnings call, UPS boasted its highest quarterly consolidated operating margin in almost 15 years, citing agility amid difficult macroeconomic conditions. While FedEx reported softness in European demand among its ailments last week, UPS gained market share in the region. Still, FedEx stood by its 2025 expectations, a move that Gordon Haskett Research Advisors called "borderline delusional." FedEx's competitors, they say, are taking a more realistic approach to the end of the pandemic-era surge in demand. Its stock fell more than 21%, wiping nearly $11 billion from its market capitalization the day after the report. It's why the company withdrew its 2023 forecast and announced it would close offices and park planes to slash costs. Since around the time of its investor day, Subramaniam said last week that FedEx has seen weekly declines in shipping volumes. "They weren't expecting, nor had built in, an economic downturn," Hoexter said.
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