Updated from 9:03 a.m. EDTFedEx ( FDX) missed earnings and revenue estimates during its fiscal third quarter and plans $1 billion in annual cost cuts, but anticipates economic improvement in the second half of 2009. CEO Fred Smith said Thursday that he expects companies will need to boost depleted inventories. "Inventories are now being bled off and they will have to be restocked beginning later in the year if the economy stays even at these levels," Smith said on an earnings conference call. "You will have to have some increase in the order cycle if you don't have a decline in the GDP, and we do not anticipate there will be a significant further decline in GDP for calendar-year 2009. "During the fourth calendar quarter, what happened was a hard down (sharp drop) by a lot of people in terms of their purchases," he said. "You had a huge spike in inventory. The inventory-to-sales ratio went up to levels that hadn't been seen in years." In the fiscal third quarter ending Feb. 28, the overnight package shipper reported net income of $97 million or 31 cents a share. Analysts surveyed by Thomson Reuters had estimated 46 cents. The company earned $1.26 a share a year earlier. Revenue was $8.14 billion, down 14%. Analysts had estimated $8.6 billion. The company said it plans further cost-cutting moves, including network-capacity reductions at FedEx Express and FedEx Freight, unspecified staff reductions and reduced spending in other areas. For fiscal 2010, the moves are targeted to reduce expenses by about $1 billion. Looking ahead, FedEx said it expects earnings of 45 cents to 70 cents in the current quarter, excluding one-time charges. Analysts were estimating 72 cents. The company said revenue declines were partially offset by stringent cost-control efforts and market-share gains, including volumes gained as a result of DHL's exit from the U.S. domestic package market. At FedEx Express, revenue fell 18% to $5.05 billion, and operating income fell 89% to $45 million. At FedEx Ground, revenue rose 4% to $1.79 billion, and operating income rose 15% to $196 million. At FedEx Freight, revenue fell 21% to $914 million, and the segment reported an operated loss of $59 million, reflecting "the extraordinary decline in demand for freight services."