FedEx Warns of Global Recession, Slashes Forecast by 500M

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Image credit: Bannon Morrissy / Unsplash

Here are the key facts of this story, as agreed upon by CNN, Reuters, Finance, and Wall Street Journal.

  • FedEx stocks dropped steeply Fri. and the shipping company warned of a global recession as demand for packages has plunged worldwide. On Thurs. FedEx warned that a slowing economy — especially in Asia and Europe — has prompted the company to reduce revenue projections by $500M.
  • The analysis from the U.S.-based firm aligned with outlooks from fellow logistics companies including Hong Kong-based Pacific Airways and French-based CMA CGM in suggesting that consumers are saving for gas and food instead of casual shopping.
  • Analysts cite inflationary stress in the U.S., resource strain in the European economy, and cascading effects from China’s COVID lockdowns as factors in FedEx’s gloomy outlook.
  • In a note written by investment company J.P. Morgan to its clients, J.P. Morgan speculated whether Amazon’s rapidly-growing logistics services — including newly-announced free shipping software for vendors, and shipping rate discounts — may also be pressuring FedEx.
  • FedEx is planning to close some offices and ground some of its aircraft to slash costs.
  • FedEx is also having challenges with independent contractors — whom it uses for ground deliveries instead of employees — who are concerned with working conditions and rising costs. Approximately 1K out of FedEx’s 6K contractors have joined a trade association to advocate for better pay.

And these are the key narratives that have emerged for this story:

  • Establishment-critical narrative, as provided by Supply Chain Dive. The volatility of the COVID pandemic and rampant inflation exposed deep structural issues at FedEx and in the logistics industry. The ‘essential workers’ are independent contractors who suffer brutal conditions, long hours, and unacceptably low compensation. There must be labor solidarity to advocate for better pay, improved health and safety, and perhaps the legal protections of being a “franchisee” of the struggling shipping giant.
  • Pro-establishment narrative, as provided by Market Watch. The gloomy forecast from FedEx is indeed staggering, but it’s due to a failure to cut costs, rather than “big picture” global economic trends. FedEx is finally trimming expenses by closing offices and freezing new hires. The company needs to improve its agility first, then its performance can be discussed in the context of the logistics industry and global economy.