Raj Subramaniam, the president and CEO of FedEx, halted hiring late last week amid recession fears.
On Friday, FedEx stock dropped 21.4%, lowering its shares by $43.85 and earning the “worst performer” status of the S&P 500 that day. It was the company’s most significant “one-day fall … [dating] back to at least 1978,” according to the Dow Jones.
The price fall is partly due to increased hiring and training costs and ongoing supply chain issues. Founder Fred Smith fears “stagflation” is happening and that “low labor participation rates” will translate to a lack of applicants for open positions.
FedEx “simply [does] not have the workers to meet the demand that’s been juiced by the printing of money. It’s like sitting in your car and putting your foot on the accelerator and the brake at the same time,” Smith said in an interview with Fox Business over the weekend.
Attempting to mitigate plummeting stock, FedEx put a freeze on all hiring efforts for an undisclosed period of time. Shipments drastically dropped in the previous quarter, leading to Friday’s stock drop. Next, FedEx will shut down 90 brick-and-mortar storefront locations and five corporate offices.
“Over the last 15 or 16 months, there have been five separate occasions” when money was “pumped into the economy,” Smith said. “The problem is when that comes head-to-head with the lack of labor we have in the United States to meet the demand.”
Since the stock dropped Friday, it has declined another $2 to $157.40 a share. “We are a reflection of everybody else’s business, especially the high-value economy in the world,” Subramaniam said.
The shipping company CEO warned, “We’re seeing that volume decline in every segment around the world … the weekly numbers are not looking so good, so we just assume at this point that the economic conditions are not really good.”
FedEx’s competitors, UPS, XPO Logistics, and Amazon.com Inc., also saw drops in stock prices of 2.42%, 2.23%, and 1.97% (as of September 20 at 3 p.m. CDT), respectively.
Chief Equity Strategist Todd Lowenstein of the Private Bank at Union Bank admitted, “The market is increasingly coming to terms that the Fed is not going to be there to save the day.”
“We are swiftly addressing these headwinds, but given the speed at which conditions shifted, first quarter results are below our expectations,” Subramaniam said simply in a FedEx press release.
Across the unusually somber economy echoes Lowenstein’s rhetorical question: “Is this the canary in the coal mine?’
