FedEx Corporation has said that the global economy is worsening, and it cut its forecast for the fiscal year ending in May by about 10%.
The world's second largest package delivery company also said today that net income for the current quarter ending in November should fall well below last year's quarter.
FedEx's forecasts are closely watched for signals of future economic health.
Its results provide insight into the global economy because of the number of products it ships and the number of countries in which it does business.
The company now expects to earn between $6.20 and $6.60 per share for the full fiscal year, compared with a previous forecast of $6.90 to $7.40 per share.
FedEx said it is seeing a drop in demand for more expensive priority services. As the global economy has slowed, FedEx customers have switched to cheaper deferred delivery services and the company has not been able to cut costs fast enough to match the decline in demand.
This trend is most prominent in the Express unit, where FedEx has already made cuts but plans to make more. It has reduced flights and taken planes out of service, and last month it offered redundancies to employees.
Operating income in that unit, which is about double the size of any other, fell 28% in the first quarter. Revenue rose 1% as higher rates countered lower volume. FedEx plans to announce a restructuring for that unit next month.
In the three months to the end of August, FedEx earned $459m, or $1.45 per share. That hit the top end of its recently lowered estimate. Revenue rose 3% to $10.79 billion. It earned $464m, or $1.46 per share, on revenue of $10.52 billion in the same quarter a year ago.
The company's ground unit performed better in the first quarter as consumers and businesses opted for slower shipments to save money. Operating income in the company's ground segment rose 9% on an 8% increase in revenue.
