Shares in U.S. delivery firm FedEx Corp (FDX.N) shed more than 4% on Thursday after hiring difficulties tempered its 2022 earnings forecast.
FedEx founder and CEO Fred Smith told analysts that operations at the Memphis-based company are being crimped by an inability to find enough workers.
Widespread labor shortages are hitting FedEx in the form of “higher wage rates and lower productivity, particularly in the (current fiscal) first quarter, and this is reflected in our overall outlook for the year,” Chief Financial Officer Mike Lenz said.
FedEx expects 2022 earnings, excluding items, of $20.50 to $21.50 – just ahead of analysts’ average estimate of $20.37, according to Refinitiv data. Still, shares fell $13.31 to $290.38 in extended trading.
Data from Convey Inc shows FedEx lags both UPS and the U.S. Postal Service when it comes to on-time deliveries.
Staffing challenges “contributed to recent service levels that do not meet our own high expectations,” Chief Operating Officer Raj Subramaniam said.
For example, failure to recruit package handlers sends overtime costs up and requires parcels to be routed away from regions with inadequate labor, Subramaniam said.
The firm recently suspended freight shipping for roughly 1,400 customers to help relieve pressure on its network – which has been running at near full tilt for much of the pandemic.
FedEx expects the labor situation to improve over the next two or three months as it starts preparing for the peak holiday shipping season, CFO Lentz said.
The pandemic created so much demand for package delivery and freight services that FedEx and rival United Parcel Service Inc (UPS.N) are turning away some business.
That means customers means are less likely to push back when the carriers raise fees and add surcharges, said Edward Jones analyst Matt Arnold.
Still, Arnold said labor could continue to be an issue going into the holidays.
FedEx also reported a slightly higher than expected increase in profit and revenue for the fourth quarter that ended May 31.
Adjusted net income nearly doubled to $1.36 billion, or $5.01 per share, from the year-earlier quarter. Revenue increased 30% to $22.6 billion.
Analysts had expected fourth-quarter earnings of $4.99 per share and revenue of $21.5 billion, according to Refinitiv.
FedEx shares finished the regular trading session up roughly 150% from March 1, 2020 – some two weeks before U.S. states and jurisdictions began closing businesses to curb the spread of the coronavirus.