Online Shopping Benefits FedEx -- WSJ
July 01 2020 - 03:02AM
Dow Jones News
By Paul Ziobro and Allison Prang
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 1, 2020).
FedEx Corp. said Christmas-like levels of online shopping
boosted its business, and it is seeing tentative signs that the
global economy is recovering from the coronavirus pandemic.
The delivery giant also experienced a jump in international
cargo during the fiscal fourth quarter, helping to offset the
significant decline in commercial shipments as thousands of
businesses closed due to broad lockdowns.
FedEx posted a 3% drop in total revenue to $17.4 billion.
Analysts polled by FactSet were expecting revenue of $16.8
billion.
Shares rose more than 8% in after-hours trading.
FedEx has seen a significant surge in deliveries to homes during
the pandemic as homebound shoppers buy more online. The company
said that 72% of shipments in the U.S. went to residences in the
latest quarter, compared with 56% a year ago. Its Ground unit,
which is more exposed to e-commerce shipments, posted a 20%
increase in revenue during the latest period, with average daily
shipping volume up 25% from the same time last year.
Chairman and Chief Executive Fred Smith said that deliveries
tied to online shopping were comparable to the level seen during
the holidays.
FedEx has been pivoting its business to cater more to online
merchants by delivering seven days a week and incorporating new
technology to optimize routes. The pandemic has accelerated a shift
in shopping habits, including shoppers feeling more comfortable
buying things like furniture and pricey electronics online. More
older consumers are discovering online shopping too.
"What we expected to happen over a few years happened in a
matter of months," operating chief Raj Subramaniam said on
Tuesday's earnings call.
Home deliveries tend to have higher costs, as drivers travel
farther and make more stops compared with a route filled with more
business deliveries where multiple packages are dropped off at a
time.
FedEx has taken steps to try to curb the influx of online orders
and offset the higher costs. In recent weeks, it set limits on how
many orders retailers like Kohl's Corp. could ship out of their
stores, which were converted to miniature distribution centers
fulfilling online orders. It also recently imposed extra surcharges
on certain packages, including for shipping oversize items,
following similar added fees by United Parcel Service Inc.
The company's commercial shipping volumes fell significantly
during the quarter but business-to-business shipments have picked
up in recent weeks after bottoming out in April.
"There are signs of tentative economic recovery under way,"
Chief Marketing Officer Brie Carere said.
The company also incurred about $125 million in extra costs as
it bought protective equipment for workers and other safety
supplies.
The company reported a loss of $334 million, or $1.28 a share.
FedEx's loss a year ago was $1.97 billion, or $7.56 a share. The
latest results included costs related to adjustments to its
retirement plan and goodwill impairment charges.
The company said adjusted earnings were $2.53 a share. FactSet
said analysts expected $1.58 a share in adjusted earnings for the
quarter.
The company said it wasn't giving an outlook for earnings for
the new fiscal year "as the timing and pace of an economic recovery
are uncertain." It said it planned to reduce its capital spending
by about $1 billion from the prior year as it cuts spending on
replacement vehicles and delays upgrades to some facilities.
Write to Paul Ziobro at Paul.Ziobro@wsj.com and Allison Prang at
allison.prang@wsj.com
(END) Dow Jones Newswires
July 01, 2020 02:47 ET (06:47 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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