Fedex Restructures To Cut Costs, Hikes Dividends By 10%

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Kevin George
Kevin George
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Kevin George is a freelance crypto writer and editor for Investopedia. He holds a master's degree in finance and has extensive knowledge and experience in the area of trading, markets, and economics.
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Published April 05, 2023
FedEx truck

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FedEx (FDX) is restructuring its business to reduce $4 billion in costs by 2025 but is also rewarding its shareholders with a 10% increase in dividends.

Key Takeaways

  • FedEx has announced a restructuring of its business segments into one unit.
  • The company is currently embarking on a cost-saving plan of $4 billion.
  • Recent earnings at the company have suffered from slower demand and inflationary pressures.

The logistics company expects the new operating structure to be fully implemented by June 2024 and will bring FedEx Express, FedEx Ground, FedEx Services, and other FedEx operating companies under the Federal Express Corporation umbrella. FedEx Freight will continue to operate as a small freight transportation service with current FedEx CEO Raj Subramaniam serving as President and CEO of the newly-combined organization.

The FedEx board has also approved a 10% increase in its annual dividend of $0.44 per share, to $5.04 per share for fiscal 2024.

The move was welcomed by investors and Fedex shares were up about 1.5% intraday on Wednesday.

In its third-quarter earnings report last month, FedEx said demand weakness and inflation had been weighing on its performance with fiscal 2023 revenues coming in at $22.2 billion versus $23.6 billion in the previous year. Net income also slipped from $1.11 billion to $771 million over the same period and FedEx said it will cut its global headcount by 25,000 in May 2023 as part of the cost-cutting program.

Bank of America Senior Transportation Analyst Ken Hoexter told Yahoo Finance the recent cost-cutting initiatives were "just the start," with FedEx finally providing “tangible evidence” that it can recover the cost of inflation in its earnings decline.

FedEx shares have risen about 31% since the start of the year and are up a little more than 4% in the past 12 months.

FedEx 1yr chart

YCharts
Article Sources
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  1. FedEx. "FedEx Announces Planned Restructuring"

  2. FedEx. "FedEx Organisation Chart."

  3. FedEx. "Third Quarter Earnings Results".

  4. Yahoo Finance. "FedEx Working to Recover Inflation Cost".

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