FedEx shares plunged 21% in premarket trading on Friday after warning late Thursday that a slowing economy would see it fall $500 million from its revenue target.
A weaker global economy, particularly in Asia and Europe, hurt FedEx’s express delivery business. The company said demand for packages weakened in the final weeks of the quarter.
The company said it was responding by cutting flights and temporarily parking planes, cutting staff hours, delaying some hiring plans and closing 90 FedEx offices and five corporate headquarters.
FedEx (FDX) said its adjusted profit for the quarter that ended Aug. 31 would be down $260 million, or 17%, from a year earlier. Revenue increased by $1.2 billion, or 5%, despite the company not meeting its original target.
FedEx Ground service, which is the company’s primary means of handling deliveries of online purchases made by U.S. consumers, missed its $300 million sales target.
The company uses independent contractors, not employees, to make deliveries, and many of these contractors complain that rising costs for fuel, labor and new vehicles have made their unprofitable business. Some are threatening to shut down operations on Black Friday, just at the start of the holiday shopping season, unless FedEx agrees to change their compensation.
FedEx insists it will work with contractors who have problems. He sued the former entrepreneur who was the firm’s most vocal critic.
“We recognize that current economic conditions pose new challenges,” FedEx Ground said in a statement last month. “We remain committed to working one-on-one with service provider companies to address challenges specific to their circumstances. Our goal is to enable the success of both FedEx Ground and service providers.
About 1,000 of the 6,000 contractors who work for FedEx have joined a trade association to lobby the company for better pay.
A survey by the association released this week found that 54% of respondents said their business with FedEx was losing money, 35% said it broke even, and only 11% said it was profitable. The association said the survey reached 1,200 contractors working for the company or who had left the company in the past 12 months.