FedEx Corp. reported growing profits despite declining revenue in its first quarter of fiscal 2024 ended Aug. 31.
FedEx revenue declined to $21.7 billion, down from $23.2 billion in the year-ago period. However, operating income grew over the same time period, up to $1.49 billion from $1.19 billion last year. Margins also improved, reaching 6.8%, up from 5.1% last year. Net income reached $1.08 billion, from $875 million in the previous period.
478 retailers in the Top 1000 use FedEx for at least some of their fulfillment. The Top 1000 is Digital Commerce 360’s ranking of North America’s leading online retailers by web sales.
FedEx revenue by category
FedEx Express operating income grew 18% during the first fiscal quarter, while revenue declined 9%.
Operating income grew 59% for FedEx Ground because of yield improvements and cost reductions, FedEx said. Cost per package declined 2% due to better productivity in first- and last-mile deliveries, it said.
FedEx Freight had different results, with operating income declining 26% due to lower fuel surcharges. Freight also closed 29 terminal locations in the quarter, FedEx said.
“FedEx Ground had an outstanding quarter which, when combined with improved earnings at FedEx Express and expense controls across the organization, led to our better-than-expected overall financial performance,” Raj Subramaniam, FedEx president and CEO, said in a statement.
In June 2024, FedEx Express, FedEx Ground and FedEx Services will be consolidated into one company, it noted.
FedEx focused on cutting costs
The delivery company attributed growing profitability to cost-cutting measures across its offerings.
“Cost reductions and transformation efforts that benefited the quarter included structural flight reductions, the alignment of staffing with volume levels, parking aircraft, and shifting to one delivery wave per day in the U.S.,” FedEx said in a press release.
The savings are part of a plan to cut costs by $1.8 billion in the fiscal year. FedEx says the savings will be spread evenly across the year, pointing to $130 million in savings in FedEx Ground in Q1.
FedEx executives said demand was down across the board. FedEx Ground and international export volumes increased year over year, the shipping company said, but still reflect a “muted demand environment.”
The volume of domestic parcels will be down about 25% in fiscal 2024, Brie Carere, chief customer officer, estimated.
To combat declining demand, FedEx announced a price increase of 5.9% going into effect in January. The company will also implement demand surcharges over the holiday season, when volume typically increases.
For the fiscal first quarter ended Aug. 31, FedEx reported:
- Revenue declined 6% to $21.7 billion.
- Net income increased by $205 million to $1.08 billion.
- Net margin increased to 6.8%, up from 5.1%.
Percentage changes may not align exactly with dollar figures due to rounding. Check back for more earnings reports.
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