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FedEx posts drop in quarterly profit amid labor shortage, cuts earnings forecast

PUBLISHED ON 2021-09-22 03:04:00 EST Shubhangi

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Delivery firm FedEx Corp on Tuesday posted a 7% drop in quarterly profit and also cut its full-year forecast, due to labor shortages in country which adversely affected the shipping speeds.

Shares of the company fell 4.5% to $240.75 in extended trading after the news.

FedEx said the company experienced a $450 million year-over-year increase in costs due to staffing issues which results in higher wage rates and higher spending on transportation services.

"The impact of constrained labor markets remains the biggest issue facing our business" and was a key driver for the first quarter underperformance, FedEx Chief Operating Officer Raj Subramaniam said.

"We anticipate the cost pressures from network inefficiencies to persist through peak," Subramaniam said. "Overcoming staffing and retention challenges is our utmost priority."

Adjusted net income of the company fell to $1.19 billion, or $4.37 per share, compared to $1.28 billion, or $4.87 per share, the prior year.

Revenue increase 14% to $22.0 billion for the quarter ended August 31.

Amid the report, FedEx lowered its full-year forecast for earnings, excluding items, to $19.75 to $21 per share. FedEx’s earlier forecast of earnings per share, excluding items, was $20.50 to $21.50.

As the holiday season approaches, FedEx and rival United Parcel Service Inc are bust hiring workers as e-commerce demand may pick up pace again due to delta variant COVID-19 infections.

FedEx plans to hire 90,000 workers amid the holiday season spike. The company hired 70,000 people last year while 55,000 people in 2019.

(With inputs from Reuters)

Picture Credits: Reuters

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