Fiscal fourth quarter 2020 earnings for Memphis-based global transportation and logistics services provider FedEx saw annual declines, due, in large part, to the ongoing impact of the COVID-19 pandemic.
Revenue—at $17.4 billion—was off 2.3% compared to $17.8 billion a year ago, and operating income—at $475 million—was well off from $1.32 billion a year ago. The company’s quarterly net income on an adjusted basis—at $663 million—trailed the $1.32 billion recorded a year ago. Adjusted earnings per share—at $2.53—trailed the $5.01 from a year ago while topping Wall Street expectations of $1.52.
“Though our fiscal fourth quarter performance was severely affected by the COVID-19 pandemic, I am extremely proud of the herculean efforts of our team members,” said Frederick W. Smith, FedEx Corp. chairman and CEO. “With safety as the first priority, these men and women provided essential transportation of critical supplies across the globe and delivered peak-level e-commerce volumes in the United States. As a result of the strategic investments we have made to enhance our capabilities and efficiencies, FedEx is well positioned to support and benefit from the reopening of the global economy.”
Revenue for FedEx Express was down 10% annually, at $8.56 billion, with operating income off 56%, at $338 million. FedEx Ground revenue headed up 20%, to $6.394 billion, with operating income down 17%, to $673 million. Revenue for FedEx Freight, its less-than-truckload segment, dipped 17%, to $1.615 billion, and operating income was off 17%, to $132 million.
Total quarterly package revenue, at $6.412 billion, was down 14%. Total U.S. package revenue, at $2.995 billion, was down 16%, and total international export package revenue, at $2.554 billion, was down 9%.
Total daily U.S. domestic package volume fell 10%, to 2.666 million and U.S. revenue per package, at $17.55, was off 6%. Total daily international export packages at 827,000 were down 2.3% with average revenue per package down 5.3% to $48.26.
Brie Carere, FedEx Executive Vice President, Chief Marketing and Communications Officer, said on the company’s earnings call yesterday that the economic outlook is highly uncertain making forecasting incredibly challenging.
“Around the world, we saw a marked decline in global economic activity in the final quarter of fiscal year 2020,” she said. “However, to date we have experienced week-over-week improvement in our business since hitting the bottom in mid-April. As we enter fiscal 2021, there are signs of tentative economic recovery under way.Here in the United States, the COVID pandemic has accelerated e-commerce adoption, while detrimentally affecting the business-to-business segment. Several years of retail share gains have been compressed into a few months in the United States with e-commerce as a percentage of U.S. retail increasing from 16% in calendar year 2019 to 27% in April 2020.”
As for the impact of e-commerce on the FedEx bottom line, she said that the company anticipates e-commerce, as a percentage of retail, will stay elevated.
Carere added that surging e-commerce sales from FedEx’s large customers drove significant FedEx volume in the fiscal fourth quarter and a sizable mix shift from commercial B2B to Home Delivery/B2C volume.
“In Q4, FedEx total U.S. domestic residential volume was 72% versus 56% a year ago,” she said. “Since the end of April, however, we have seen week-over-week growth in our business-to-business segment. Needless to say, we've been very focused on improving revenue quality given the high demand against limited market capacity and a higher cost to serve. FedEx Ground B2C yields remain above market despite pressure from large customer mix and a move to shorter zones. In early June, we announced that we were implementing three temporary surcharges, including a SmartPost surcharge of $0.40 per package, an oversized surcharge of $30 per package and a residential delivery charge of $0.30 per package to offset incremental expenses incurred in our networks.”
Addressing the United States e-commerce market, Raj Subramaniam, FedEx President and Chief Operating Officer, said on the call that the trends FedEx experience during the quarter drove home the importance of the company’s strategic initiatives that directly address e-commerce.
“This includes FedEx Ground's seven-day operations, investments in technology that optimize last mile deliveries, over-the-threshold deliveries through FedEx Freight Direct and integration of FedEx SmartPost volumes to increase delivery density,” he said. “In many ways, the macro trends accelerated to meet our existing strategy and what we expected to happen over a few years happened in a matter of few months.”
FedEx fiscal year 2020 revenue, at $69.2 billion, was down slightly from $69.7 billion a year ago. And operating income, at $3.12 billion, was down 40%.