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At FedEx, nightmare of September seems very far away

Shares spike higher as company gets religion on cost reductions

FedEx has a large facility at Los Angeles International Airport. (Photo: Jim Allen/FreightWaves)

Two days do not make a trading trend. But for the second consecutive session, FedEx Corp. shares are spiking.

Near the close of trading Thursday, FedEx (NYSE: FDX) shares were up nearly 6.3%, or more than $12 a share. This comes on the heels of a 4.2% gain as of the closing bell Wednesday. 

The catalyst for the cumulative share gains was Wednesday’s announcement that the Memphis, Tennessee-based company would lay off at least 10% of its global director and officer workforce as part of an ongoing plan to eliminate 12,000 employee positions — some of them empty spots that won’t be filled — by the end of its 2023 fiscal year on May 31, 2024. 

The broad cuts began at the start of the 2023 fiscal year when FedEx began experiencing a sudden and sharp downturn in international air volumes at its FedEx Express air and international unit. The company shocked everyone in mid-September when it pre-announced very weak fiscal first-quarter results due largely to a dramatic drop in trans-Pacific air volumes.


The estimates of high-level employees affected by Wednesday’s action are all over the lot. A source told FreightWaves on Wednesday that the director and officer cuts would be very modest because there were only 100 of those executives throughout FedEx’s global network. Satish Jindel, president of consultancy ShipMatrix, disputed that claim. According to Jindel, who has been involved with FedEx for about 25 years, there are around 1,000 executives at those levels across the company.

In a Thursday note, Ken Hoexter, an analyst at BofA Securities, said there were around 4,000 employees working at those upper levels. FedEx has not divulged the number of employees in its director and officer ranks.

Hoexter raised his 12-month price target on FedEx shares to $233 a share from $204. He estimated the company will save $60 million from the head-count reduction announcement and an additional $500 million in potential savings from losing the 12,000 positions. Those savings are layered on top of a combined $7 billion in cost reductions between Thursday and fiscal year 2027 that the company has already announced, according to Hoexter.

The analyst noted that FedEx Express’ margins are rising from 14-year lows, aided by a reduction in its air route network. FedEx Express cut 40 routes, most of them in the domestic U.S., in its fiscal second quarter, Hoexter said.


Hoexter lauded FedEx for turning “cost-cut aspirations” into reality. “We are more confident in FedEx’s outlook as it reduces excess capacity and enhances productivity,” he wrote.

Tom Wadewitz of UBS also took a bullish view, raising his 12-month target to $225 a share. Wadewitz said Wednesday’s announcement was “meaningful but not large.” However, Wadewitz pointed out the move was important to show investors that FedEx is serious about implementing cost-reduction measures. 

Wadewitz hinted that there were further cuts to come as the company goes down the organizational chart. Though senior managers and managers make less money than their upper-level counterparts, the number of them is larger. 

Long overdue move

For Jindel, Wednesday’s announcement was long overdue. He has long criticized FedEx for having a bloated organizational hierarchy and not having the same sharp focus on costs and efficiency as rival UPS Inc. (NYSE: UPS). He called the reductions that began in June “impressive” and lauded FedEx CEO Raj Subramaniam, who took the reins from founder Frederick W. Smith last year, for taking unprecedented action that runs counter to the company’s long-standing culture. 

Jindel said FedEx has never laid off more than 2,000 employees at one time in all the years he has been connected with the company.

FedEx will likely go no further than the 12,000 cuts by the time the current fiscal year ends, Jindel said. FedEx has about 500,000 worldwide employees, but that doesn’t include the driver contractors and drivers who operate exclusively for FedEx Ground, the company’s domestic ground-parcel delivery unit.

However, that doesn’t mean the work is done. Further streamlining is expected in fiscal years 2024 and ’25 as FedEx progresses with a plan to integrate its domestic Express and Ground operations and turn over most of the deliveries to its lower-cost Ground unit, according to Jindel. 

Hoexter of BofA said operations in Alaska have been integrated, and Hawaii will soon follow suit.


Jindel believes the integration will eventually make certain operations at the Express unit redundant. All Express employees are non-union except for their pilots. Because labor issues may crop up at Express given the nature of the air-ground relationship, FedEx will be reluctant to fire Express employees. Instead, it will wait for them to retire and not replace them.

The cuts in the next two fiscal years will not be as dramatic as in this fiscal year, Jindel said. “It will be more surgical and will be a trimming process” that is a better way to reduce headcount and costs than through mass layoffs, he said.

Jindel has said in the past that FedEx could add billions of dollars a year to the bottom line if it successfully executes the integration. 

2 Comments

  1. Craig B

    It’s funny with a nightmare swirling at ups with contract negotiations starting soon. The freight waves former ups employees can oy focus on FedEx.

  2. Andrew j Salzano. 19954

    Happy to see fdx bouncing back. Proud of my thirty years of service with them. They know what the are doing always have. Mr. Smith is a legend. A military vet/Nam vet as myself. September announcement was not a surprise. Retired 12 years.

Comments are closed.

Mark Solomon

Formerly the Executive Editor at DC Velocity, Mark Solomon joined FreightWaves as Managing Editor of Freight Markets. Solomon began his journalistic career in 1982 at Traffic World magazine, ran his own public relations firm (Media Based Solutions) from 1994 to 2008, and has been at DC Velocity since then. Over the course of his career, Solomon has covered nearly the whole gamut of the transportation and logistics industry, including trucking, railroads, maritime, 3PLs, and regulatory issues. Solomon witnessed and narrated the rise of Amazon and XPO Logistics and the shift of the U.S. Postal Service from a mail-focused service to parcel, as well as the exponential, e-commerce-driven growth of warehouse square footage and omnichannel fulfillment.