FedEx meets lowered demand for shipping with cost-cutting and layoffs
FedEx meets lowered demand for shipping with cost-cutting and layoffs
Consumers are spending more money on things to do — concerts, eating out, travel — and less on stuff, like clothes and furniture. That has put some pressure on the people who ship and deliver all that stuff, especially FedEx.
The company is dealing with another quarter of revenue decline — and it’s in the middle of a restructuring, which has included layoffs and facility closures.
To understand what’s happening with FedEx, Stifel analyst Bruce Chan looked back to spring 2020.
“Remember how hard it was to get toilet paper at the very beginning of the pandemic?” Chan said.
That’s just one of many supply chain-related shortages that caused shippers to overorder. As they caught up, manufacturers and retailers were left with a glut of inventory that Chan said they’re finally working down.
“And that’s been causing a lot of pressure on freight flows and freight volumes,” he said.
That’s as FedEx is spending more on wages and equipment like forklifts while people are choosing experiences over goods. But as they get that out of their system, “and there’s a better balance between goods and services spending, we will actually have a restock cycle later this year,” said Deutsche Bank analyst Amit Mehrotra.
That’s when they’ll be filling inventory for holiday shoppers. But FedEx can’t blame their lackluster performance all on the economy.
“When revenue is going down, it exposes a lot,” Mehrotra said.
Tough times have pressured FedEx to become more efficient, he said. The company plans to cut costs by $4 billion in two years.
And there are new opportunities ahead for the company, especially with small and mid-sized retailers like Shein, said Prakash Mirchandani, director of the University of Pittsburgh’s Center for Supply Chain Management.
“They are grabbing a greater proportion of the market,” Mirchandani said.
He said FedEx will be competing with UPS and other shippers as retailers up their e-commerce game.
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