FedEx warned consumers this week of an impending global recession, as predicted by the declining global demand for packages, CNN reports.
The company stated that the declining economy would lead to FedEx's targetted revenue being cut by $500 million due to a weakened global economy, particularly in Asia and Europe. The demand for FedEx express delivery business has drastically declined abroad, especially in the final weeks of the current financial quarter. Following the announcement late Thursday, FedEx (FDX) shares dropped 22 percent after the market opening on Friday.
Company leaders expect business conditions to continue to weaken throughout the rest of the second quarter, which lasts until November. Although analysts had forecasted a gain in profit, FedEx profits are expected to drop more than 40 percent.
In response to CNBC's question of whether he believed the decline in profits for his company was a sign of an impending recession, FedEx CEO Raj Subramaniam replied, "I think so. These numbers, they don't portend very well."
CNN reports that the company will reduce flights, temporarily ground aircraft, cut staff hours, and close 90 FedEx Office locations in response to its financial woes. They also plan to cut $500 million from its capital expenditure budget for its fiscal year, which lasts until May 2023.
Following the FedEx announcement, CNN reports that U.S. stocks fell on Friday morning. The Dow declined by 1.1 percent, the S&P 500 fell 1 percent, and the Nasdaq was down 1.3 percent.