FedEx has seen a sharp drop off in the number of package deliveries and has warned of troubles ahead for the economy. Esther Fung and Will Feuer report in The Wall Street Journal:
FedEx Corp.’s warning of a sharp drop in package deliveries set off fresh worries among investors about the outlook for the global economy, sparking another down day in stock markets on Friday.
The delivery giant’s shares lost 21% Friday—its biggest one-day percentage drop ever—after the company said a macroeconomic slowdown had led to lower volumes of goods moving around the world in recent weeks. All three major U.S. stock indexes fell Friday, capping a week where the S&P 500 declined 4.8% and the Dow Jones Industrial Average dropped 4.1%.
The chief executives at General Electric Co. and Verizon Communications Inc. also pointed this week to signs of economic troubles. GE’s Larry Culp said managing supply chains remained difficult, threatening to slow deliveries and push up costs; while Verizon’s Hans Vestberg said there had been a pickup in customer churn, or cancellations, after a recent price increase.
The world’s two biggest economies have been slowing this year. In the U.S., the Federal Reserve has been raising interest rates to combat inflation that has been hovering near four-decade highs. Gross domestic product, a broad measure of the goods and services produced across the economy, fell 0.9% in the second quarter and 1.6% in the first three months of 2022.
China released a raft of economic data on Friday, including figures showing that housing price declines accelerated and consumer spending remained weak. However, infrastructure investment picked up more quickly than expected, and China’s labor market improved.
FedEx and rival United Parcel Service Inc. have confronted lower volumes of packages this year as a pandemic boom in online shopping cools. Consumers have switched more of their spending to travel and entertainment, plus high inflation has reduced the number of items being purchased. Big retailers that are FedEx customers like Walmart Inc. have also pulled back on orders after they have been stuck with a glut of unsold goods.
The leaders of companies as diverse as Yankee Candle maker Newell Brands Inc. to fertilizer maker Scotts Miracle-Gro Co. have recently warned that there was a sharp pull back by retailers since spring after stores found themselves with too much inventory. The glut of goods and high U.S. inflation have lowered analysts’ expectations for consumer spending heading into the holiday season, which is typically FedEx’s busiest period.
For FedEx, the revised outlook this week marks a reversal from where it stood just a few months ago and presents a fresh challenge for the company’s new Chief Executive Officer Raj Subramaniam, a FedEx veteran who took over June 1 from founder and Executive Chairman Fred Smith.
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