American delivery firm FedEx Corp. reported a 7 percent drop in quarterly profit and cut its full-year forecast on Tuesday, due to labor shortages slashing earnings, slashing packages and pushing up costs ahead of the all-important holiday peak season.
Shares in Memphis, Tennessee-based company fell 4.6 percent to $240.50 in extended trading after FedEx, higher wage rates as a result of employee problems and overtime costs caused by overtime, increased by $450 million annually. increased. Services and shipping hiccups.
“The impact of constrained labor markets remains the biggest issue in our business” and was a key driver for the poor first quarter performance, FedEx Chief Operating Officer Raj Subramaniam said on a conference call with analysts.
Officials said most of the additional labor expenditure hit the company’s ground network – which is now reshipping 600,000 packages a day, or 6.4 percent of the segment’s average daily volume during the quarter – from labor shortages. to work around the problems precipitated, the officials said.
As an example, Subramaniam said its center in Portland, Oregon, has just 65 percent employees. This requires paying FedEx more and sending packages to other hubs – spending on time, package miles, and outside help.
“We anticipate cost pressure from the inability of networks, such as I just illustrated, to stay through the peak,” Subramaniam said. “Overcoming staffing and retention challenges is our top priority.”
FedEx said adjusted net income for the first quarter ended August 31 fell by $1.19 billion, or $4.37 per share, from $1.28 billion, or $4.87 per share, a year earlier.
Revenue rose 14 percent to $22.0 billion.
On the heels of the report, FedEx lowered its full-year forecast for earnings, excluding commodities, from $19.75 to $21.00 per share. FedEx previously forecast 2022 earnings per share, excluding items of $20.50 to $21.50.
FedEx and competitor United Parcel Service Inc. are racing to hire Holiday Help as a resurgence of Delta variant-driven COVID-19 infections threatens to increase demand for e-commerce delivery during the holiday season, when package volumes ease. can be doubled.
FedEx aims to bring in 90,000 holiday workers. It hired 70,000 last year and 55,000 in 2019.
Up-and-coming rival Amazon.com Inc. is offering an average salary of $18 an hour as it races to expand its own distribution network. Amazon’s non-federal delivery contractors compete with FedEx and its ground delivery partners for workers.
UPS employees are unionized and are among the highest paid in the industry. Shares of UPS are down 2.6 percent following the FedEx report.
At market close on Tuesday, FedEx shares fell 10 percent over the past six months, while UPS shares rose 19 percent.
by Lisa Bartlin
This News Originally From – The Epoch Times