Weeks before the busiest shipping time of the year, the CEO of FedEx said it will be shutting down stores and corporate offices. It will also freeze hiring as demand for package delivery has waned.
“Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the U.S.” Raj Subramaniam said in a statement to The Associated Press. “We are swiftly addressing these headwinds, but given the speed at which conditions shifted, first-quarter results are below our expectations.”
It will also defer new hires and will cut the number of flights, the AP reported.
The Memphis, Tennessee, based company is expected to close more than 90 FedEx Office locations and five corporate offices.
During an interview on CNBC, Subramaniam said he believes a worldwide recession is imminent.
Despite planning for shipping to increase once factories that had been closed in China due to the COVID-19 pandemic reopened, the demand actually fell, CNBC reported.
Last month, the contractors who deliver for the FedEx Ground division were at a crossroads with the company.
While FedEx employees deliver FedEx Express packages, the ground division uses more than 6,000 independent companies that each hire dozens to more than 100 drivers. These drivers still wear FedEx uniforms but are employees of third-party companies.
As many as 30% of contractors were losing money this year because of higher costs including fuel, trucks and drivers.
They were trying to form a trade group to put pressure on FedEx to raise compensation rates.
But while technically, the contractors cannot coordinate a shutdown under antitrust laws, there has been talk of a shutdown among contractors before Black Friday, CNN reported in August.
“My business will not be able to continue operation past Nov. 25. Peak season is one of highest cost of operations time of the year. I have to double the number of trucks, hire drivers. I will not do so if things don’t change,” Spencer Patton, a FedEx contractor said, according to CNN.
Patton’s company alone delivered about 6.5 million packages for FedEx last year.