FedEx (FDX.N) saw its most significant Express division see a decline in demand from the U.S. Postal Service. This caused the company to lower its full-year revenue projection and announce quarterly earnings that fell well short of analysts’ forecasts on Tuesday. This caused shares to tumble by 9.8%.

The shares of the international delivery company closed at $280 on Tuesday, but in extended trading, they dropped to $252.58. Additionally, the outcomes caused a 2.9% decline in shares of competitor United Parcel Service (UPS.N.).

According to FedEx, adjusted earnings increased by 23% to $1.01 billion, or $3.99 per diluted share, for the quarter that ended on November 30. However, LSEG data shows that the outcome was 19 cents per share, below analysts’ expectations.

During the remaining portion of the fiscal year that ends on May 31, FedEx stated in a regulatory filing, “We expect revenue will continue to be pressured by volatile macroeconomic conditions negatively affecting customer demand for our services across our transportation companies.”.

FedEx had predicted essentially unchanged earnings, but now it predicts a low-single-digit percentage fall in revenue from last year. In response to investor pressure to reduce expenses and boost earnings, FedEx plans to buy back an extra $1 billion in common shares in its 2024 fiscal year.

The company’s airborne Express subsidiary had a 60% decline in operating profits during the quarter. The U.S. Postal Service has been transferring more parcels from higher-margin air services to more affordable ground services, which has decreased volume.

The goal of FedEx’s negotiations to extend the post office contract is to increase corporate profitability. “Renewing that will require a considerable alteration in the contractual conditions and consensus,” stated FedEx’s Chief Customer Officer, Brie Carere, during a conference call with investors.

Analysts questioned the corporation about how it intended to increase the Express division’s persistently low earnings significantly.

David Vernon, a Bernstein analyst, questioned, “Is the margin profile here fixable?” He responded that he was communicating investor worries.

FedEx CEO Raj Subramaniam stated, “I’m very confident that the margin at Express will return,” following the company’s reorganization of those operations and increased demand.

In other news, FedEx’s Ground segment had a 51% increase in operating income during the quarter. FedEx Ground is well-known for delivering goods from Walmart (WMT.N.) and other clients.

According to FedEx, Ground increased its market share throughout the quarter and kept almost all of the clients it had stolen from United Parcel Service before the contract covering UPS’s 340,000 United Brotherhood of Teamsters workers expired on August 1.

Carere remarked, “I’m confident we’ll hold on” to them.

The call was made during the busy holiday shipping season from late November to Christmas. This year’s holiday season is expected to be unremarkable due to consumer concerns about inflation and rising prices for housing, food, and other essentials.