The bad news from FedEx could be just the beginning. The package delivery giant sent markets rolling with a profit warning late Thursday that sent its shares down more than 20%, their biggest daily drop.
The announcement “was like a slap in the face” and was a “strong signal that the economy has started to slow down,” Ipek Ozkardeskaya, a senior analyst at Swissquote, told Bloomberg.
It was also she addedthe “first in a series of warnings we may see for the coming quarters.”
She wasn’t alone in her sense of foreboding. Carl Riccadonna, chief US economist at BNP Paribas, told MarketWatch on Friday: “You’re going to see more companies talking about the slowing economy, less pricing power.” Some companies might “defy the math,” she said. told him on the way outbut ultimately macroeconomic trends drive microeconomic stories.
“Margin compression and the need to liquidate inventories” will result in companies needing to “lower prices,” he added.
FedEx CEO Raj Subramaniam, meanwhile, did not hold back in doom and darkness. When asked on CNBC if a “global recession” was coming, he replied: “I think so; These numbers do not bode well. We are seeing a decrease in volume in all segments of the world. So we assume at this point that economic conditions are not going to be good.”
His company’s poor results are “a reflection of everyone else’s business,” he added in a particularly ominous note.
You’re right: FedEx, with the wide range of items it ships around the world, has long been considered a benchmark for global economic growth.
The company was expected to announce its first-quarter earnings on September 1. 22, but opted for the earnings call, which is not surprising given how badly its actual results fell short of forecasts and expectations.
In its warning, FedEx said it expected trading conditions to weaken further, adding that it would withdraw guidance for the rest of its fiscal year. He attributed the poor performance to “global volume weakness” that “accelerated” in the closing weeks of the quarter.
“We are quickly addressing these hurdles, but given the speed at which conditions have changed, first quarter results are below our expectations,” Subramaniam said in a statement. “While this performance is disappointing, we are aggressively accelerating cost reduction efforts and evaluating additional measures to improve productivity, reduce variable costs and implement structural cost reduction initiatives.”
The company also said it would defer hiring, reduce flight frequency, close 90 offices and reduce capital spending by $500 million over the next year.
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