FedEx expects supply chain disruptions to persist throughout the fiscal year against the backdrop of slowing global growth with the ongoing Russia-Ukraine war and recent lockdowns in China.
The outlook came as the logistics company reported its full financial results showing that in the fiscal year ending May 31, FedEx saw revenues increase by 11.3% year on year to US$93.5 billion as operating income was also by 6.6% to US$3.8 billion for the period.
This was driven by higher yields across its express, ground and freight businesses.
Brie Carere, FedEx chief customer officer, among others, signalled expectations of persisting disruptions in the supply chains, and slow return of bellyhold capacity despite the resumption of passenger flights as she noted that global trade growth has slowed due to the on-and-off lockdowns in China as well as the months-long war in Ukraine.
These are "limiting the flow of goods and reducing international export volumes," Carere added.
"We do anticipate supply chain disruption throughout the fiscal year," the FedEx executive said.
Looking ahead, the demand for freight is anticipated to decline over the next 12 months, while volume growth is anticipated to be in the low single digits.
"We anticipate consumers will keep spending and their spending will continue tilting towards services from goods," Carere further said.
"We expect more consumers to return to stores. With this backdrop, we do expect pressure on B2C volumes."
She continued by stating that the most recent Purchasing Managers Index revealed a "sharp decline" and that inventory replenishment is slowing after building up earlier this year and last.
Carere said, "this will dampen freight demand."
"Our volume forecast has low single-digit volume growth. We've also prepared plans to manage through a slowing economic environment if required," the FedEx executive further said.
Further momentum in 2023
In a release, FedEx noted bright prospects for its business in the fiscal year 2023.
"Our continued emphasis on revenue quality drove significant improvement in our fourth quarter results," said Michael C. Lenz, FedEx Corp. executive vice president and chief financial officer.
"We expect further momentum in fiscal 2023 and beyond as we execute on our initiatives to drive increased profitability and returns," Lenz added.
The express giant noted that these forecasts assume the company's current economic forecast and fuel price expectations.
"No additional COVID-19-related business restrictions, successful completion of the planned stock repurchases, and no additional adverse geopolitical developments," it added.