ITEM 1A. RISK FACTORS
In addition to the other information set forth in this Annual Report, you should carefully consider the following factors, which could
materially affect our business, results of operations, financial condition, and the price of our common stock. Additional risks not
currently known to us or that we currently deem to be immaterial also may materially affect our business, results of operations,
financial condition, and the price of our common stock.
Macroeconomic and Market Risks
We are directly affected by the state of the global economy and geopolitical developments. While macroeconomic risks apply to most
companies, we are particularly vulnerable. The transportation industry is highly cyclical and especially susceptible to trends in
economic activity. Our primary business is to transport goods, so our business levels are directly tied to the purchase and production
of goods and the rate of growth of global trade — key macroeconomic measurements influenced by, among other things, inflation and
deflation, supply chain disruptions, interest rates and currency exchange rates, labor costs and unemployment levels, fuel and energy
prices, public health crises, inventory levels, buying patterns and disposable income, debt levels, and credit availability. When
individuals and companies purchase and produce fewer goods, we transport fewer goods, and as companies move manufacturing
closer to consumer markets and expand the number of distribution centers, we transport goods shorter distances, which adversely
affects our yields and profitability. Certain manufacturers and retailers are making investments to produce and house goods in closer
proximity to supply chains and consumers in connection with recent macroeconomic, geopolitical, and public health developments.
Additionally, consumer spending has shifted from goods to services, and in 2023 we saw a customer preference for slower, less costly
shipping services. We expect these trends to continue. Further, the scale of our operations and our relatively high fixed-cost structure,
particularly at FedEx Express, make it difficult to quickly adjust to match shifting volume levels, which negatively affected our results
of operations in 2023. For more information, see “Our businesses are capital intensive, and we must make capital decisions based
upon projected volume levels.” below.
Our results in 2023 were adversely impacted by lower global volumes due to weak economic conditions. We are experiencing a
decline in demand for our transportation services as inflation and interest rate increases are negatively affecting consumer and
business spending. Additionally, we are experiencing higher costs to serve through higher fuel prices, wage rates, purchased
transportation costs, and other direct operating expenses such as operational supplies. During 2024, we expect macroeconomic
conditions to continue to negatively affect customer demand for our services. See Item 7. “Management’s Discussion and Analysis of
Results of Operations and Financial Condition” of this Annual Report for additional information.
Moreover, given the nature of our business and our global operations, political, economic, and other conditions in foreign countries
and regions, including international taxes, government-to-government relations, the typically more volatile economies of emerging
markets, and geopolitical risks such as the ongoing conflict between Russia and Ukraine, may adversely affect our business and results
of operations. We have suspended all services in Ukraine and Belarus. We also temporarily idled our operations in Russia and reduced
our presence to the minimum required for purposes of maintaining a legal presence with active transport licenses. While we do not
expect this conflict to have a direct material effect on our business or results of operations, the broader consequences of this conflict,
which may include further sanctions, embargoes, regional instability, and geopolitical shifts; airspace bans relating to certain routes, or
strategic decisions to alter certain routes; potential retaliatory action by the Russian government against us as a result of our idling of
operations in Russia, including nationalization of foreign businesses in Russia; increased tensions between the United States and
countries in which we operate; and the extent of the conflict’s effect on our business and results of operations as well as the global
economy, cannot be predicted.
To the extent the current conflict between Russia and Ukraine, or subsequent similar conflicts between or among other nations,
adversely affects our business, it may also have the effect of heightening many other risks disclosed in this Annual Report, any of
which could materially and adversely affect our business and results of operations. Such risks include, but are not limited to,
disruptions to our global technology infrastructure, including through cyberattack or cyber-intrusion, ransomware attack, or malware
attack; adverse changes in international trade policies; our ability to maintain or increase our prices, including our fuel surcharges in
response to rising fuel costs; our ability to implement and execute our business strategy, particularly with regard to our FedEx Express
international business; disruptions in global supply chains, which can limit the access of FedEx and our service providers to vehicles
and other key capital resources and increase our costs and could affect our ability to achieve our goal of carbon neutrality for our
global operations by calendar 2040; our ability to maintain our strong reputation and the value of the FedEx brand; terrorist activities
targeting transportation infrastructure; our exposure to foreign currency fluctuations; and constraints, volatility, or disruption in the
capital markets. Geopolitical uncertainty negatively affected operations at FedEx Express in recent years.