FedEx reported a "challenging" quarter due to a weaker industrial economy, prompting the company to lower its outlook for the rest of the year—a potential indicator of broader economic cooling. Investors often view FedEx as a gauge for both the U.S. and global economies.
The company's primary concerns are focused on industrial customers who ship goods to other businesses, rather than consumers, who drive the majority of U.S. economic activity. Despite this, FedEx CEO Rajesh Subramaniam noted that e-commerce shipments are "starting to grow again."
However, the decline in business from industrial customers is a cause for concern among FedEx and investors alike, with shares of the company falling 14% on Friday. Subramaniam acknowledged the impact, stating, "The soft industrial economy is clearly affecting our (business-to-business) volumes, and it was much weaker than anticipated, requiring us to adjust accordingly." He emphasized that shipments related to industrial production are FedEx's most profitable.
The company also highlighted a shift in demand, with a decrease in priority services and increased interest in deferred services.
