(Reuters) - FedEx Corp (NYSE:FDX) said on Tuesday that current-quarter package volumes in the United States have been below its projections, as the pandemic-driven e-commerce bubble deflates.
Delivery providers like FedEx and United Parcel Service Inc (NYSE:UPS) witnessed a surge in e-commerce volumes in the early days of the pandemic, but the firms are now left with excess delivery capacity, after the demand nosedived.
"In the U.S., you're seeing again, as anticipated, a bit of a reset from the e-commerce boom and the volume surges that accompany that," FedEx Chief Financial Officer Michael Lenz said while speaking at the Baird Global Industrial Conference.
"We projected to have lower volume in our fiscal first and second quarter already. It just came in lower than our initial projections were," he added.
In September, the company had outlined cost cuts of up to $2.7 billion after falling demand hammered first-quarter profit.
The cost cuts were initiated as the consumer spending shifted away from big-ticket purchases. Although FedEx was prepared for such a scenario, the company said demand trends reversed faster than expected.
"The commencement and the speed and the depth of that shift was beyond what we certainly had anticipated," Lenz added.
FedEx said it is cutting back on vendor headcount and deferred a number of projects, along with taking steps such as reducing flights and parking planes, as it looks to boost profitability.
The company expects the changes at its Express air network to drive savings, which are projected to be between $2.2 billion to $2.7 billion in 2023.