FedEx say staffing problems crimped earnings in first quarter
The stock fell 4% during after-hours trading after missing projections
The FedEx chief operating officer on Tuesday blamed staffing problems after reporting a 7% drop in quarterly profit and said the "constrained labor market" is the biggest issue facing the company.
Raj Subramaniam, the executive, used its distribution hub in Portland as an example of the challenges, according to Reuters. He said the facility is operating at 65%, which means the company is spending more to send packages to other hubs for delivery. He said the company expects the issue to continue through the holiday peak. He said about 600,000 packages per day are being rerouted.
The stock fell 4% during after-hours trading after missing projections and also cut guidance for 2022. Barron’s reported that the company adjusted per-share earnings of $4.37 from $22 billion in sales during the timeframe. The magazine pointed out that Wall Street was anticipating $4.88 in per-share earnings from $21.9 billion in sales.
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The Wall Street Journal reported that the staffing shortage added $450 million in costs, which included more overtime payments. The Journal also reported that the supply chain has also been a drain on the business, which includes a lack of parts and congested ports.
The paper said the company is looking to offset some of these expenditures with higher shipping prices.
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Frederick W. Smith, FedEx Corp. chairman and chief executive officer, said in a statement that the execution of our strategies "continues to drive higher demand for our services, despite the disruptive impact of the pandemic to labor availability and global supply chains."
"I am very proud of our team members around the world who continue to transport lifesaving vaccines and deliver urgently needed supplies to those affected by natural disasters like Hurricane Ida and the recent earthquakes," he said.