(Reuters) -FedEx lowered its full-year revenue forecast and missed Wall Street estimates for first-quarter profit on Thursday as customers continued to trade down from speedy, pricey delivery to cheaper, slower options.
Shares in the Memphis-based delivery giant were down nearly 10% to $271 in after-hours trading.
Profits at FedEx (NYSE:FDX) and rival United Parcel Service (NYSE:UPS) have been eroding as less-profitable packages fill their networks.
At the same time, FedEx is restructuring with executives slashing billions of dollars in overhead costs as they also merge its separate Ground and Express delivery units.
Cost cuts failed to offset the drag from weak demand for the lucrative priority services and one fewer operating day in the latest quarter, FedEx said.
The company now expects revenue for fiscal 2025 to grow by a low single-digit percentage, compared to its prior expectations of low- to mid-single digit percentage growth.
FedEx also lowered the top end of its full-year adjusted operating income to between $20 and $21 per share, compared with its prior forecast of $20 to $22 per share.
On an adjusted basis, the company earned $3.60 per share. Analysts had expected a profit of $4.76 per share, according to LSEG data.
FedEx is winding down contract work for the United States Postal Service, its largest customer, and expects a $500 million headwind from the loss of the contract in the current fiscal year.
FedEx's unprofitable USPS air contract, which accounted for about $1.75 billion in revenue to FedEx during the postal service's latest fiscal year, will end on Sept. 29. Rival UPS picked up that business.
Executives are also assessing whether to spin off or sell its FedEx Freight business.