FedEx reported $11.8 billion in revenue for the fourth quarter ended May 31, up 4% from $11.4 billion in 2013. Net income was $730 million, an increase of 141% over $303 million in the year-ago quarter.
Alan Graf, the company’s executive vice president and CFO, said the ground segment was a major contributor to the positive results, with a 19.5% operating margin benefiting from an 8% gain in average daily volume and an increase in revenue per package.
Graf said all FedEx segments saw increases in operating income on an adjusted basis, despite having one fewer day of operations. This included the freight segment (income up 51% vs. adjusted 2013 income) and express (operating income up 3% vs. adjusted 2013). He also said FedEx International Priority volume stabilized after four quarters of decline, increasing 2%.
Speaking of the company’s May announcement that it was instituting dimensional weight pricing on all domestic ground shipments as of Jan. 1, 2015, Graf said FedEx expects yield growth in fiscal 2015 through yield management programs, including the DIM weight change. UPS announced a similar move on Tuesday.
Mike Glenn, president and CEO of FedEx Services, noted the company for several years has been using dimensional weight pricing for packages measuring 3 cubic feet, adding it was “bringing consistency to the ground and express segment by applying the dimensional weight policy to all packages.”
“We announced this change several months ahead of when we would typically … to give us plenty of time to work with customers to refine their packaging specs and make sure that the packaging moving through our system and the system of our customers is the most efficient, which will benefit both the customer and FedEx,” Glenn said.
Asked by an analyst what the financial impact of the DIM weight change would be – noting a past change was projected to add $100 million in revenue – Glenn said it would be “difficult to speculate” in part because the company was “helping our customers utilize more efficient packaging.”