FedEx calls out ‘fantastical’ news reports

FedEx reported fiscal third-quarter net income down 19.3% y-o-y to $507 million, as revenue rose 8.5% to $12.7 billion. Operating income for the quarter was down 16.8% to $864 million.

But, as usual, the reported figures mask the impact of one-time charges – in this case, expenses related to legal issues and the pending acquisition of TNT. Adjusting for those charges, FedEx said net income for the quarter was up 36.5% to $692 million, and operating income was up 19.5% to $1.16 billion.

But that’s not what you want to know about, is it? What you want to know is whether Amazon’s decision to create its own air freight network will put FedEx out of business tomorrow, or not until next week. Well, FedEx founder, President, Chairman, and CEO Fred Smith didn’t waste any time getting to that question in a conference call following release of the company’s results. Rather than the usual platitudes that start such calls, Smith went straight to the heart of the matter, saying speculation that Amazon’s move would have a huge negative impact on his company (and on UPS and the US Postal Service) had been “fueled by fantastical articles and reports which are devoid of in-depth knowledge of logistics systems and the markets FedEx serves.”

He went on to emphasize that he’d chosen the word “fantastical” carefully, and that network design technology, facilities capabilities, and the route/stop density in the FedEx, UPS, and postal service systems were such that it was “highly likely” that these three entities “will remain the primary carriers for e-commerce shipments in the U.S. for the foreseeable future.”

With that out of the way, Smith, Graf, and several other senior FedEx executives discussed various aspects of the quarter ended 29 February, most of which are readily apparent in the chart at right. Perhaps of most interest to Cargo Facts readers is the exceptionally strong performance of the FedEx Express segment which reported operating income up 51% y-o-y to $595 million, despite a slight decrease in revenue (due mostly to falling fuel surcharges and unfavorable exchange rate impacts). FedEx said the improvement in operating income was “due to yield management efforts and US domestic volume growth as well as the ongoing benefits from profit improvement program initiatives.”

Average daily package volume was up 4.6% for the US Overnight Box product, and 3.7% for Overnight Envelope. The company’s other high-yield express product, International Priority, did not fare so well, with volume down 3.0%

If you are interested in learning more about FedEx’s e-commerce business, join us at Cargo Facts Asia 2016, where Karen Reddington, President, FedEx Asia Pacific, will speak on a session devoted to the impact of the e-commerce explosion on air freight. Cargo Facts Asia will take place in Hong Kong, 19 – 20 April. To register, or for more information, go to www.cargofactsasia.com.