FedEx Corp. will hire about 50,000 seasonal workers and increase hours for its existing workers to help manage its peak season and what it predicts will be another record period for e-commerce package deliveries.
“We expect once again to see record volume through our global network with multiple days more than doubling our average daily volume,” Raj Subramaniam, chief marketing and communications officer, said this week during the carrier’s fiscal first quarter 2018 earnings call.
“We’ve already begun filling positions within our Express and Ground networks, and believe we are well-positioned to successfully deliver the holidays once again,” he said.
FedEx on Tuesday announced rates will increase an average of 4.9% for 2018 for its Ground, Express Freight services.
In August, FedEx said it would charge only additional fees on items that are oversized or require special handling, rather than impose broad peak season surcharges. Subramaniam characterized the carrier’s approach as “surgical” to address the small number of large retailer customers that drive the surge in peak deliveries.
Subramaniam also highlighted how consumers will have greater access to pickup and drop-off services through the FedEx On-Site program, which includes Walgreens Co. stores, some Albertsons and some Kroger grocery stores, plus select Office Depot and OfficeMax locations.
The arrangement with Walgreens, announced in January, has progressed and is expected to be available in the drugstore chain’s nearly 8,000 stores by Oct. 31, he said. Walgreen is No. 39 in the Internet Retailer 2017 Top 500; Albertsons is No. 157, Kroger is No. 88, Office Depot is No. 13 (Office Depot and OfficeMax merged in 2013 and it operates stores by both names).
Chief financial officer Alan Graf said, “By peak shipping season, 80% of the U.S. population will be within nine minutes of a FedEx hold location.”
For the first quarter of fiscal 2018 ended Aug. 31, average daily package volume for FedEx Ground grew 4.1% to 7.688 million from 7.389 million in Q1 fiscal 2017. The Ground unit is where the bulk of e-commerce orders are handled. FedEx is the shipping carrier for 318 retailers in the Internet Retailer 2017 Top 1000.
“FedEx Ground continues to grow significantly and there are several key considerations that we focus on to continually increase operating income as we grow,” Graf said, according to a Seeking Alpha transcript. “The first is customer mix. We have long recognized that FedEx Ground does not yet have our fair share of small and medium customers, despite our industry-leading speed advantage, and we have recently accelerated our efforts to increase our small and medium customer volume.
“Second is residential versus commercial mix,” Graf said. “There are additional costs and significant operational considerations for delivering residential packages. We had a significant increase in demand from two large e-commerce customers during the first quarter. Obviously, a shift in residential mix in any one quarter affects profitability,” he said. Graf did not name those customers.
FedEx also offered updates on FedEx Fulfillment, a service it launched in February aimed at handling e-commerce fulfillment and delivery services for small and medium businesses.
FedEx began the service using a facility near Indianapolis and in June opened a second fulfillment center in Fontana, Calif., about 50 miles west of Los Angeles. Retailer customers that use both facilities can reach 94% of the U.S. population in two days via FedEx Ground, Subramaniam said. “FedEx Fulfillment is best suited for companies who manage approximately 50 to 2,000 orders per day and as you can imagine, this is a growing customer segment,” he said.
For the fiscal first quarter of 2018 ended Aug. 31, FedEx also reported:
- Total revenue of $15.30 billion up 4.4% from $14.66 billion in the same period last year.
- FedEx Ground revenue of $4.64 billion, up 8.2% from $4.29 billion.
- Revenue from its FedEx Express segment of $8.65 billion, up 2.2% from $8.46 billion.
- Net income of $596.0 million compared with $715.0 million.