Rate Hikes And e-Commerce Surge Results In Almost Doubling Of FedEx’s Quarterly Profit

A rate hike and a surge in volume helped the United States based delivery firm FedEx Corp to reduce the cost of delivering e-commerce purchases to residential addresses which had increased significantly during the novel coronavirus pandemic, which resulted in the company reporting its profits almost doubling in the latest completed quarter.

The share prices of the Memphis-based company had surged so far this year to almost double in prices. However, after executives of the company issued a warning that the new wave of the pandemic increasing economic uncertainty, the stocks of company dropped by 3.5 per cent.

The company reported a jump in its adjusted net income for its second quarter ay $1.30 billion, or $4.83 per share, compared to $660 million, or $2.51 per share, for the same period a year ago. During its latest completed quarter, the company reported a 19 per cent growth in its revenue to $20.6 billion.

According to Refinitiv data, analysts expected earnings of $4.01 per share and revenue of $19.5 billion.

A variety of surcharges has been added to their services by FedEx and rival United Parcel Service as well as increased their prices to save its profit margins as the companies struggle to cope up with unprecedented volumes of parcel delivery because of the pandemic induced growth and in recent times because of the traditional holiday shipping peak.

There was a 29 per cent growth in the average daily package volume to 12.3 million for FedEx Ground, which also touts Walmart as one of its primary e-commerce customers, during the quarter ended November 30. There was also a 7 per cent growth in revenue per package at $9.42.

“While the overall environment remains uncertain, we expect earnings growth in the second half of fiscal 2021 driven by the anticipated heightened demand for our services,” FedEx CFO Michael Lenz said in a statement.

The phenomenal rise in parcel volumes because of a surge in e-commerce based shopping is being attempted to be managed by FedEx by offering incentives to customers to p[lace delivery orders for their e-commerce packages during the weekends when the delivery network of the company is not so busy as throughout the rest of the week.

However the efforts of the company and its retail customers to try and convince customers to make the majority of their holiday purchases prior to the traditional Black Friday and Cyber Monday shopping season starts has apparently failed miserably.

“We really were hoping to change shopping behavior and we really didn’t see that,” said FedEx marketing chief Brie Carere.

(Adapted from DeccanHerald.com)

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