FedEx on Thursday released its third-quarter earnings report, upping its full-year earnings forecast as cost-cutting measures like major layoffs and air freight cutbacks take hold, even as shipping volumes globally remain challenged, boosting its stock more than 9% in after-hours trading.
FedEx executives this week announced plans to integrate its operating companies – ground, express and freight – to drive operational efficiencies and eliminate redundancies, with the hopes of more than recouping the one-time expense of $2 billion over five years to make it happen. Network 2.0 was unveiled during an investor’s day event.
FedEx delivered strong revenue and profit for the third quarter, but the latter was below analyst expectations, and volume was negatively impacted by the Omicron variant to the tune of $350 million between Express and Ground, a falloff the company said began rebounding in February.
FedEx is diverting some Express deliveries into its less expensive Ground network to drive efficiency and build ecommerce package density after parting ways with Amazon in 2019, according an internal memo obtained by the WSJ. FedEx will redirect residential Express packages to Ground as they get close to their destination.
Despite public pronouncements from FedEx Chairman and CEO Fred Smith that he is unconcerned about Amazon as a logistics competitor, the company used that term in its recently released annual report for the first time in connection with the ecommerce giant. Further actions by Amazon will “reduce our revenue” FedEx stated.
Close on the heels of its decision earlier this month to cut ties between Amazon and its Express air delivery unit, FedEx is reportedly offering big discounts on the service to draw in more ecommerce business and take it away from rival UPS, according to the Wall Street Journal.
FedEx has decided not to renew its air shipping contract with Amazon, which expires June 30, in a seeming reaction to Amazon’s growing delivery prowess, including construction of a new air hub outside Cincinnati. Amazon’s ground and international business with the carrier remains intact for now.
FedEx has expanded its FedEx First Overnight service to more than 4,400 zip codes across the U.S. With this expansion, the service now reaches more than 32,000 zip codes for next-business day delivery, representing 92% of the business population in the U.S.
FedEx has announced a number of rate changes, some of which will take place in January while others will take effect Nov. 2, ahead of the holiday rush.
FedEx grew Q1 revenue and earnings but missed analyst forecasts, and lowered its fiscal 2016 outlook. Weak global conditions and currency issues were cited.