FedEx shares tumble as customers opt for slow and cheap

STORY: FedEx shares tumbled almost 11% in U.S. after-hours trade on Thursday.

The plunge came after the delivery giant reported a steep drop in quarterly profits, and lowered its forecast for the full year.

FedEx says customers are trading down from speedy, pricey services, to slower, cheaper options.

Chief Executive Raj Subramaniam said industrial demand was also weaker than expected, citing a drop in priority shipments between businesses.

That’s a red flag for the U.S. economy, with FedEx often seen as a bellwether for corporate activity.

Subramaniam is now overseeing a complex restructuring of the company.

That will see its Ground and Express delivery units merged, with a goal to save billions of dollars in overheads.

Other units could be spun off or sold altogether.

Simultaneously, FedEx is winding down its contract work for the United States Postal Service - its biggest customer.

Its unprofitable air transport service for the mail network will end in late September.

Arch-rival UPS is picking up the contract instead.

However, it too saw shares slide in after-hours trade, dragged lower by the glum outlook from FedEx.