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.
Speaking on CNN, Smith called the idea that raising the tax rate for the nation's top earners will hurt the economy "mythology." Huffington Post has the video.