FedEx quarterly profit down 1pc to US$459 million, but freight up 114pc

MEMPHIS-based global express delivery giant FedEx Corp has reported a one per cent slip in quarterly net profit to US$459 million, drawn on revenues of $10.79 billion, up three per cent year on year.

"Weakness in the global economy constrained revenue at FedEx Express during our first quarter and affected earnings," said FedEx chairman, president and CEO Frederick Smith.

"Meanwhile, our FedEx Ground and FedEx Freight segments performed well, with both improving operating margins," said Mr Smith.

FedEx Freight reported a net profit of US$90 million in the fiscal quarter ending August 30, up 114 per cent from a year ago, drawn on revenues of $1.4 billion, up five per cent year on year.

Said FedEx CFO Alan Graf: "Earnings for the first quarter were below expectations as weak global economic conditions dampened revenue growth, drove a shift by our customers to our deferred services and outpaced our near-term ability to reduce FedEx Express operating costs to match demand levels."

FedEx Express will increase shipping rates by a net average of 3.9 per cent for US domestic, US export and US import services effective January 7. The full average rate increase of 5.9 per cent will be partially offset by adjusting the fuel price threshold at which the fuel surcharge begins, reducing the fuel surcharge by two per cent.

As of the beginning July, the FedEx Freight unit cut back on transit times in up to 6,000 lanes alongside a general rate increase of 6.9 per cent on non-contract rates. It consolidated its LTL network by focusing on priority and economy services across all lengths of haul and lanes.

Its less-than-truckload average daily shipments increased four per cent due to an increase in customer demand for the FedEx Freight Economy service offering in all lengths of haul and lanes, while LTL yield increased two per cent due to improvements in FedEx Freight Economy yields, up in previous two quarters by four and six per cent respectively.

It improved its operating margin by 6.4 per cent giving the division a 93.6 operating ratio for the quarter ending August, which marks the start of the fiscal year.

FedEx Ground continued with a strong performance at five per cent increase on average daily package volume against FedEx Express average daily, which dropped five per cent while its domestic package movement increased two per cent.