Written by Ananta Agarwal
(Reuters) – FedEx plans to cut between 1,700 and 2,000 back-office jobs in Europe, in its latest cost-cutting effort as the package delivery giant faces a decline in demand for shipping.
FedEx (NYSE:) said the cuts will extend over 18 months and will result in a pre-tax cost of $250 million to $375 million related to legal fees and severance benefits.
The reduction will help save between $125 million and $175 million annually beginning in fiscal year 2027.
Facing weak freight demand and slow margin growth in its air express unit, its largest segment, the company embarked on cost cuts to boost profits.
The Memphis-based company had outlined plans to cut costs worth $4 billion by the end of fiscal 2025, including $1.8 billion in fiscal 2024, as part of a plan to restructure delivery networks and tighten capacity.
“I think what it tells us is that a broad-based overall recovery is still a long way off,” said Stuart Glickman, deputy director of research at CFRA Research.
“Both Europe and the US are struggling to achieve volume growth, and at the moment, cutting costs is the way to go,” Glickman added.
FedEx, competitor United Parcel Service (NYSE:) and other delivery companies saw a surge in demand during the early days of the pandemic when homebound consumers shopped online.
But with the resumption of travel and dining, this trend has been reversed and also exacerbated by higher inflation.
UPS also implemented $1 billion in cost-cutting plans this year. It said in January it would cut 12,000 jobs and explore strategic options for its struggling Coyote truckload brokerage business amid weak demand and spare capacity in the trucking industry.
In March, FedEx raised its financial profit forecast for 2024, as cost cuts helped its earnings per share exceed market expectations.
FedEx operates in more than 45 countries and regions in Europe and employs more than 52,000 people, according to its website.