Strong FedEx Earnings Drive Investments for 2021

December 18, 2020


FedEx’s latest earnings for the period ending November 30 were strong as the company reported overall revenue of $20.6 billion up 19.1%. Operating income as reported $1.47 billion compared to $554 million same period last year and adjusted operating income of $1.51 billion compared to $684 million. Operating margin as reported was 7.1% and adjusted 7.4%.

Impressive Results for FedEx Ground

While all divisions reported strong gains, it was the Ground division that reported perhaps the most impressive results for the quarter.

FedEx Ground reported revenue of $7.3 billion, up 38.2%. Average daily volumes for the Ground division, up 29% year-over-year and revenue per package at $9.42 compared to $8.80 same period last year.

"I believe peak surcharges for the holiday season are the new normal for our industry" - Brie Carere, Executive Vice President, Chief Marketing and Communications Officer, a telling quote and one that sums up this year and will continue into 2021.

COVID-19 Impact

A number of trends will likely remain when the COVID-19 pandemic eases, chief among them is e-commerce. The sudden shift from in-store purchases to online purchases in early March of this year led to record volumes for FedEx and UPS but also higher costs and delivery delays for the two largest small parcel providers in the U.S.

To address the higher costs, record volumes and delivery delays, additional surcharges were implemented within the Ground divisions in May and June. The day after these surcharges ended, holiday peak season surcharges took effect and will remain in place until mid-January. As soon as they end, just announced peak surcharges on Smartpost, Oversize and Additional Handling by FedEx will go into effect until further notice.

However, costs to support strong demand and expand services, along with COVID-19 safety expenses, weighed on overall company results with such costs as purchased transportation costs up 25% year-over-year and salaries and employee benefits up 19%.

Strides Towards Efficiency

Despite the costs, the Ground division reported impressive efficiency gains during the quarter. According to Henry Maier, President and CEO of FedEx Ground, during the quarter there was “a 22% improvement in stops per hour year-over-year. The average cost per stop has been reduced by 15% year-over-year. And causing our assets to sweat 7-days a week, the in-sourcing of SmartPost has allowed us to reduce our fixed cost per package by 9% year-over-year in the quarter. And we’ve also seen a material reduction in miles per stop.”

2021 Outlook

While an outlook for 2021 was not provided, CFO, Mike Lenz noted that the company plans to spend more on capital expenditures in its Ground business including “new automated facilities as well as expansion of existing ones…to improve Ground margins and profitability.” In addition, the company plans to “continue to deploy technology to further enhance that asset productivity, as well as deeper collaboration with our customers to optimize when, where, and how we receive the shipments.”


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.

Share this article:

Blog Posts

  • Categories

Strong FedEx Earnings Drive Investments for 2021

December 18, 2020


FedEx’s latest earnings for the period ending November 30 were strong as the company reported overall revenue of $20.6 billion up 19.1%. Operating income as reported $1.47 billion compared to $554 million same period last year and adjusted operating income of $1.51 billion compared to $684 million. Operating margin as reported was 7.1% and adjusted 7.4%.

Impressive Results for FedEx Ground
While all divisions reported strong gains, it was the Ground division that reported perhaps the most impressive results for the quarter. FedEx Ground reported revenue of $7.3 billion, up 38.2%. Average daily volumes for the Ground division, up 29% year-over-year and revenue per package at $9.42 compared to $8.80 same period last year. "I believe peak surcharges for the holiday season are the new normal for our industry" - Brie Carere, Executive Vice President, Chief Marketing and Communications Officer, a telling quote and one that sums up this year and will continue into 2021.
COVID-19 Impact
A number of trends will likely remain when the COVID-19 pandemic eases, chief among them is e-commerce. The sudden shift from in-store purchases to online purchases in early March of this year led to record volumes for FedEx and UPS but also higher costs and delivery delays for the two largest small parcel providers in the U.S. To address the higher costs, record volumes and delivery delays, additional surcharges were implemented within the Ground divisions in May and June. The day after these surcharges ended, holiday peak season surcharges took effect and will remain in place until mid-January. As soon as they end, just announced peak surcharges on Smartpost, Oversize and Additional Handling by FedEx will go into effect until further notice. However, costs to support strong demand and expand services, along with COVID-19 safety expenses, weighed on overall company results with such costs as purchased transportation costs up 25% year-over-year and salaries and employee benefits up 19%.
Strides Towards Efficiency
Despite the costs, the Ground division reported impressive efficiency gains during the quarter. According to Henry Maier, President and CEO of FedEx Ground, during the quarter there was “a 22% improvement in stops per hour year-over-year. The average cost per stop has been reduced by 15% year-over-year. And causing our assets to sweat 7-days a week, the in-sourcing of SmartPost has allowed us to reduce our fixed cost per package by 9% year-over-year in the quarter. And we’ve also seen a material reduction in miles per stop.”
2021 Outlook
While an outlook for 2021 was not provided, CFO, Mike Lenz noted that the company plans to spend more on capital expenditures in its Ground business including “new automated facilities as well as expansion of existing ones…to improve Ground margins and profitability.” In addition, the company plans to “continue to deploy technology to further enhance that asset productivity, as well as deeper collaboration with our customers to optimize when, where, and how we receive the shipments.”

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.

Share this article:

Blog Posts

  • Categories