FedEx said in a statement on Thursday that it expected to report that profits shrank in its latest quarter, a decrease the shipping giant attributed to a broader slowdown of the global economy.
In a preliminary financial statement for the quarter, which ended Aug. 31, FedEx said the profit it generated, $1.19 billion, was down 15 percent compared with the same period last year. The company also withdrew its earnings forecast for the year, a sign of further volatility in the shipping industry.
Factors affecting FedEx’s business included “macroeconomic weakness in Asia and service challenges in Europe,” the company said in the statement. Among the potential risks to future business, FedEx cited the ongoing war in Ukraine and the continuing effects of the Covid-19 pandemic.
“We are swiftly addressing these headwinds, but given the speed at which conditions shifted, first-quarter results are below our expectations,” Raj Subramaniam, FedEx’s chief executive, said in a statement. The company did not immediately respond to requests for comment.
To counteract the slowdown, FedEx said it would cut back on flights, reduce its Sunday operations at some locations, freeze hiring and close more than 90 locations. FedEx also said it would eliminate five corporate offices, part of a broader review of its real estate holdings.
FedEx’s results are a gloomy sign for the U.S. economy, which has sent mixed signals to analysts trying to diagnose its health. Inflation remains high, and job growth has slowed, but demand for workers continues to be strong amid increased consumer spending in sectors including travel and restaurants. Supply chains have been particularly sluggish, as the shipping industry grapples with ripple effects from the Covid-19 pandemic.
FedEx said it expected business conditions to worsen for its next quarter. As a result, the company said it would cut its capital spending for this year by about $500 million from its earlier projections.
Following the company’s announcement, FedEx’s stock price fell about 15 percent in after-hours trading.