FedEx wrings out profit as pandemic-fueled e-commerce deliveries surge

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LOS ANGELES/BENGALURU (Sept 16): US delivery firm FedEx Corp reported a bigger-than-expected quarterly profit on Tuesday, after price hikes, lower fuel costs and efficiency gains countered negative impacts associated with a pandemic-fueled surge in e-commerce shipments.

Shares in the Memphis-based company jumped 7.6% to US$254.66 in extended trading. Average daily package volume for FedEx Ground, which handles e-commerce deliveries for retailers like Walmart, jumped 31% to 11.6 million during the fiscal first quarter ended Aug 31.

Revenue per package rose 2% to US$9.33 during the quarter, which also included one additional business day. Covid-19 upended operations at FedEx and rival United Parcel Service. Lucrative deliveries to businesses dried up and higher-cost residential deliveries boomed, as workers sheltered at home and placed online orders for everything from office furniture and exercise equipment to snacks and pet food.

Home deliveries traditionally have been more expensive because they involved fewer packages and far-flung stops. Rising volumes and investments in things like automated sorting centres and route optimisation are bringing those costs down.

"Minor improvements can make a big difference whenever you're moving this many packages a day. The worst of the pressures on profitability are probably behind the company," Edward Jones analyst Matt Arnold said.

FedEx spent US$565 million on fuel across the company during the quarter, 35% less than a year earlier. FedEx did not provide an earnings forecast for fiscal 2021, citing continued uncertainty but said it expects annual capital spending of US$5.1 billion, above analysts' average estimate of US$4.96 billion, according to Refinitiv data.

Fiscal first quarter adjusted net income at FedEx jumped 60% to US$1.28 billion or US$4.87 per share. Revenue rose 13.5% to US$19.3 billion. Analysts expected earnings of US$2.69 per share and revenue of US$17.55 billion.