FedEx Ground Yields Jump as it Reports Record Operating Income Growth

March 19, 2021


Strong volume growth in the US. domestic residential package combined with pricing initiatives resulted in FedEx Ground achieving a record operating income of $702 million for its fiscal third quarter that ended Feb. 28. Ground volumes increased 25%.

Overall, the company reported total revenue up 23% to $21.5 billion and net income up 183% to $892 million for the quarter. However, severe winter weather during February reduced the quarter's operating income by an estimated $350 million. The weather significantly impaired operations at several of the company's facilities, including FedEx Express hubs in Memphis, Indianapolis, and North Texas.

"As reflected in this quarter's results, continued execution of our strategies is producing strong earnings growth and margin improvement across our company. We expect demand for our unmatched e-commerce and international express solutions to remain very high for the foreseeable future," Fred Smith, chairman, and chief executive officer of FedEx, said in the company's press release.

Indeed, according to Brie Carere, vice president and chief marketing and communications officer of FedEx, e-commerce as a percentage of US retail sales was about 21% in Q4 of calendar 2020, significantly above the pre-pandemic level. By 2022, the US domestic parcel market is expected to grow to 101 million packages a day, with e-commerce contributing 86% of total US market growth.

FedEx's total US domestic residential package volume mix was 70% versus 62% a year ago during the quarter. With the increase of residential packages in its networks, Carere noted that it is focused on improving yield and product mix. As such, FedEx Ground Economy yield increased by 35% and overall US domestic residential yields by 15% year-over-year during the quarter.

"Collaboration between operating companies continued at an unprecedented rate in Q3. This month marks the one-year anniversary of the launch of last-mile optimization, which allows us to flex our networks to increase delivery density for residential, rural, and deferred packages," Raj Subramaniam, president, and chief operating officer of FedEx, told analysts on the earnings call.

Last-mile optimization will expand to six more markets on May 1, increasing to 63 markets in total and covering two-thirds of the US GDP, Subramaniam said. "Additionally, FedEx Freight has delivered more than 1.75 million shipments for Ground so far this fiscal year. This time last year, Freight had yet to deliver a single Ground shipment," he further said.

This year, FedEx expects strong Ground volumes to continue with capacity constraints continuing as well.

 


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Spend Management Experts provides strategic guidance to optimize your supply chain. Using cost modeling technology and market intelligence, we help companies with their transportation, distribution and fulfillment spend. Often large shippers can reduce their spend across the supply chain by 20% or more. We specialize in reducing distribution costs, increasing efficiencies, dynamic reporting, greater budgeting and forecasting accuracy and optimizing supply chain execution. We leverage our proprietary models to identify savings and build negotiation strategies based on data and business cases. As industry experts, our fresh approach provides clients with straightforward details on exactly how savings are derived. Spend Management Experts is your competitive edge, delivered.

Connect with Spend Management Experts on TwitterLinkedIn, and the Spend Management Experts blog.

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FedEx Ground Yields Jump as it Reports Record Operating Income Growth

March 19, 2021


Strong volume growth in the US. domestic residential package combined with pricing initiatives resulted in FedEx Ground achieving a record operating income of $702 million for its fiscal third quarter that ended Feb. 28. Ground volumes increased 25%. Overall, the company reported total revenue up 23% to $21.5 billion and net income up 183% to $892 million for the quarter. However, severe winter weather during February reduced the quarter's operating income by an estimated $350 million. The weather significantly impaired operations at several of the company's facilities, including FedEx Express hubs in Memphis, Indianapolis, and North Texas. "As reflected in this quarter's results, continued execution of our strategies is producing strong earnings growth and margin improvement across our company. We expect demand for our unmatched e-commerce and international express solutions to remain very high for the foreseeable future," Fred Smith, chairman, and chief executive officer of FedEx, said in the company's press release. Indeed, according to Brie Carere, vice president and chief marketing and communications officer of FedEx, e-commerce as a percentage of US retail sales was about 21% in Q4 of calendar 2020, significantly above the pre-pandemic level. By 2022, the US domestic parcel market is expected to grow to 101 million packages a day, with e-commerce contributing 86% of total US market growth. FedEx's total US domestic residential package volume mix was 70% versus 62% a year ago during the quarter. With the increase of residential packages in its networks, Carere noted that it is focused on improving yield and product mix. As such, FedEx Ground Economy yield increased by 35% and overall US domestic residential yields by 15% year-over-year during the quarter. "Collaboration between operating companies continued at an unprecedented rate in Q3. This month marks the one-year anniversary of the launch of last-mile optimization, which allows us to flex our networks to increase delivery density for residential, rural, and deferred packages," Raj Subramaniam, president, and chief operating officer of FedEx, told analysts on the earnings call. Last-mile optimization will expand to six more markets on May 1, increasing to 63 markets in total and covering two-thirds of the US GDP, Subramaniam said. "Additionally, FedEx Freight has delivered more than 1.75 million shipments for Ground so far this fiscal year. This time last year, Freight had yet to deliver a single Ground shipment," he further said. This year, FedEx expects strong Ground volumes to continue with capacity constraints continuing as well.  


ABOUT SPEND MANAGEMENT EXPERTS

Spend Management Experts provides strategic guidance to optimize your supply chain. Using cost modeling technology and market intelligence, we help companies with their transportation, distribution and fulfillment spend. Often large shippers can reduce their spend across the supply chain by 20% or more. We specialize in reducing distribution costs, increasing efficiencies, dynamic reporting, greater budgeting and forecasting accuracy and optimizing supply chain execution. We leverage our proprietary models to identify savings and build negotiation strategies based on data and business cases. As industry experts, our fresh approach provides clients with straightforward details on exactly how savings are derived. Spend Management Experts is your competitive edge, delivered. Connect with Spend Management Experts on TwitterLinkedIn, and the Spend Management Experts blog.

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