FedEx to Slash Up to 2,000 Jobs in Europe Amid Freight Demand Decline, Eyes $175 Million Annual Savings

FedEx (NYSE: FDX) aims to trim off between 1,700 and 2,000 back-office positions across Europe, responding to a notable drop in freight demand. This strategic move, aiming to reduce expenses over 18 months, will entail a pre-tax financial impact ranging from $250 million to $375 million, largely to cover legal and severance expenses.

By cutting these roles, FedEx hopes to achieve annual savings of $125 million to $175 million starting in the fiscal year 2027. The Memphis-headquartered company has been grappling with sluggish demand and tepid margin growth, notably within its air-based Express division—their largest operational segment. In light of these challenges, cost-reduction strategies have become essential to boosting profitability.

This initiative is part of a broader scheme, aiming to slash $4 billion in expenses by the end of fiscal 2025, which includes an aggressive $1.8 billion target for fiscal 2024. FedEx's strategy includes restructuring its delivery network and optimizing capacity utilization. Stewart Glickman, deputy research director at CFRA Research, encapsulated the situation by noting, “The elusive nature of a broad macro recovery is evident, with both Europe and the U.S. grappling to generate volume growth. At present, cost cuts are the primary lever available.”

The delivery industry, including rivals like United Parcel Service (NYSE: UPS), saw an unprecedented surge in demand during the pandemic’s early stages as consumers shifted to online shopping while confined at home. However, as conditions normalized and people returned to travel and dining out, this surge tapered off, compounded by rising inflation. UPS has also taken strides to reduce expenditures, planning to cut $1 billion in costs this year. In January, the company announced its intent to lay off 12,000 employees and review strategic options for its unpredictable truckload brokerage segment, Coyote, due to weak demand and industry overcapacity.

Interestingly, despite these operational adjustments, FedEx had recently upped its profit forecast for fiscal 2024, as the reduction efforts elevated its earnings per share beyond market expectations. Currently, FedEx sustains operations in more than 45 European countries and territories, employing a workforce exceeding 52,000.