Consultant Insight: FedEx credits strong revenue management for Q4 earnings

There's growth — and then there's growth — and in FedEx's fiscal fourth quarter ending May 31, the company’s achievements were in revenue management versus volume growth. As a result of revenue management measures, FedEx ended fiscal 2022 with a record revenue of $93.5 billion and adjusted operating income of $6.9 billion, both up 11% year over year. Declines in average daily volumes were reported in the Ground and Express divisions. [caption id="attachment_69752" align="alignright" width="389"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo World columnist[/caption] "We anticipate consumers will keep spending, and their spending will continue tilting towards services from goods. We expect more consumers to return to stores. With this backdrop, we do expect pressure on B2C volumes," FedEx Chief Customer Officer Brie Carere told analysts during the company's June 23 earnings call. " Global trade growth has slowed from disruptions related to lockdowns in China and the conflict in Ukraine, limiting the flow of goods and reducing international export volumes. We do anticipate supply chain disruptions throughout the fiscal year." FedEx's strategy will continue to focus on revenue quality as one of the key levers to help offset the ongoing macroeconomic pressures and drive improved margins going forward. Additionally, FedEx CEO Raj Subramaniam noted that technology-based initiatives will also be a focus to drive increased productivity in the company's line-haul and dock operations and optimize the last mile. Mike Lenz, FedEx executive vice president and chief financial officer, described the strategy as "sweating the assets," with FedEx planning to lower its facility investment at the Ground division. Express division efficiencies In terms of efficiencies gains in the Express division, Subramaniam emphasized the group's integrated network and consolidation of flights into its Charles de Gaulle (CDG) air hub , citing that, since April, the number of European airports FedEx Express services from CDG have increased by 71%, and the number of intra-Europe flights was reduced by 13%. FedEx continues to project optimism about the air express market, forecasting that the Europe to Asia lane will recover by the first quarter of 2024, and airlines' belly capacity on the trans-Pacific lane is estimated to recover by the third quarter of 2024. Commercial capacity between Europe and Asia is not expected to recover until the first quarter of 2025. Outlook for 2023 The fiscal 2023 outlook will be one of a "very targeted growth strategy," Carere said. "We will prioritize revenue quality and are intent on pursuing business that provides attractive yields on our assets.” FedEx has advantages over its competition, Carere said, including: It is the only provider to bundle parcel and LTL portfolio; The Ground division is faster to more locations than UPS Ground, and FedEx Ground delivers on Sunday, while UPS does not; Express and Ground are the first nationwide carriers to provide picture proof of delivery for every U.S. residential delivery that doesn't require a signature; and It offers intercontinental B2C and B2B segments, including for manufacturing, health care, tech and ecommerce customers. With the potential for a softening of the U.S. economy, FedEx expects shippers to trade down in service levels with the likelihood that there will be more demand for its deferred portfolio. But the company will continue to focus more on its premium portfolio and those customers who need bundled services. "We will be very thoughtful about not just attracting customers that rely solely on our deferred portfolio, and it is about making sure that we maximize the value of our networks," Carere said. The company plans to provide additional details on its strategy at its annual investors' conference scheduled for June 29.

Consultant Insight: FedEx credits strong revenue management for Q4 earnings

White Walker resurrects 747-200F after long-term storage

Some carriers opt out of handling lithium batteries

Related Posts

Four carriers sign MoU to strengthen their share of Japan-Europe market

NCA to take over ANA’s 777F fleet

Emirates SkyCargo fiscal half-year revenue jumps 52%

Some carriers opt out of handling lithium batteries

Cargo Facts Free Newsletters

Cargo Facts Connect Podcast

Follow Us

Welcome Back!

Retrieve your password