(Reuters) – FedEx on Thursday cut its full-year revenue forecast and missed Wall Street estimates for first-quarter profit as customers continued to opt for cheaper, slower options over fast, expensive deliveries.
Shares of the Memphis-based delivery giant fell nearly 10% to $271 in after-hours trading.
Profits at FedEx and rival United Parcel Service have been eroding as less profitable packages fill their networks.
At the same time, FedEx is restructuring, with its executives cutting billions of dollars in overhead costs while merging its separate ground and express delivery units.
Cost cuts failed to offset weak demand for lucrative priority services and one fewer operating day in the latest quarter, FedEx said.
The company now expects fiscal 2025 revenue to grow by a low single-digit percentage, compared with its prior expectations of low- to mid-single-digit percentage growth.
FedEx also lowered the upper limit of its full-year adjusted operating income to between $20 and $21 per share, compared with its previous forecast of $20 to $22 per share.
On an adjusted basis, the company earned $3.60 per share. Analysts had expected profit of $4.76 per share, according to LSEG data.
FedEx is ending a contract with the U.S. Postal Service, its largest customer, and expects to face a $500 million hurdle from losing the contract in the current fiscal year.
FedEx's unprofitable air contract with USPS, which accounted for about $1.75 billion in revenue for FedEx during the postal service's last fiscal year, is set to end Sept. 29. Rival UPS has taken over that business.
Executives are also considering whether to spin off or sell its FedEx Freight business.
(Reporting by Lisa Baertlein in Los Angeles and Ananta Agarwal in Bengaluru; Editing by Shounak Dasgupta and Lisa Shumaker)
