FedEx is cutting more than 10% of its officers and directors, CEO Raj Subramaniam announced Wednesday, as the company slashes corporate jobs to cut costs amid cooling consumer demand.
“Unfortunately, this was a necessary action to become a more efficient, agile organization. It is my responsibility to look critically at the business and determine where we can be stronger by better aligning the size of our network with customer demand,” Subramaniam said in a letter to FedEx team members.
Shares of FedEx were up more than 3% in afternoon trading Wednesday.
The layoffs come as shipping momentum slows after the Covid pandemic e-commerce boom.
The package and shipping industry experienced a surge during the pandemic amid a spike in online consumer spending. But as inflation has shrunk consumers’ wallets, it has also eaten into FedEx’s profits. The company’s stock is off roughly 20% over the past year.
As a result, FedEx has experienced a rough first half of its fiscal year and has sought to cut costs while also raising prices to offset slowing volume.
After it reported a fiscal second quarter with sagging sales and profit due to global volume declines, FedEx announced it would cut $1 billion more in costs by parking planes and shutting down some of its offices. In 2022, the company reduced its U.S. and international flight time by 13% combined.
During its second-quarter earnings call with analysts, Subramaniam outlined what he called an “aggressive and decisive plan to cut costs in fiscal 2023.” The company is aiming to cut about $3.7 billion in total during this fiscal year.
Along with cost-cutting, FedEx’s path forward has also involved price hikes. The company raised shipping rates by 6.9%, which took effect this January, as another measure to offset a consumer slowdown. At the time, Subramaniam said he forecast a “worldwide recession.”
FedEx rival UPS is also anticipating “a bumpy year,” according to its CFO, Brian Newman. The shipping company on Tuesday posted a revenue decline for its fourth quarter, as shipping volumes continue to dip. To counteract slowing consumer demand, UPS also raised its shipping prices by 6.9% at the end of last year.