FedEx results show scale of online shopping boom

FedEx has laid bare the scale of the online shopping boom in the run-up to the peak US holiday season, producing its highest quarterly sales on record after the logistics group handled millions of additional packages and implemented surcharges on shipments.

Earnings released on Thursday showed FedEx Ground, the company’s small-package ground delivery business in North America, handled an average of 12.3m packages every day in the three months to the end of November, up from 9.6m for the same period a year ago.

FedEx, whose global network spans 680 aircraft, 200,000 vehicles, and 600,000 employees, also carried 6.2m pounds of freight daily through its “international priority” freight service — 19 per cent more than 2019 levels.

Demand for parcel delivery has meanwhile boosted the pricing power of FedEx, which has introduced a range of peak charges of more than $1 per package. Revenue per package at its Ground division rose from $8.80 a year ago to $9.42.

“Peak surcharges for the holiday season are the new normal for our industry,” said Brie Carere, executive vice-president. “There’s been some fundamental shifts in the market.”

The results cement the status of FedEx as one of the biggest corporate winners from the coronavirus crisis, with quarterly revenues across the group up 19 per cent year-on-year to $20.6bn. Net income more than doubled to $1.23bn.

Raj Subramaniam, chief operating officer, said FedEx was reaping the rewards from investments it had made in ecommerce, including expanding deliveries on Sundays.

“In many ways, we have been operating at peak-like level since March due to surges in ecommerce volume,” he said.

FedEx shares have gained 88 per cent this year, giving the Memphis-based company a market capitalisation of $77bn. The shares slipped 3.7 per cent in after-hours trade after it declined to provide a financial outlook.

Michael Lenz, chief financial officer, said the resurgence of coronavirus infections added “significant uncertainty” to the company’s ability to predict demand, and “cloud our ability to forecast full-year earnings”.

FedEx also incurred a $215m increase in variable staffing expenses and $50m worth of Covid-19 related costs in the quarter.

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