Christmas came in July for
The delivery company posted the highest quarterly revenue in its history as the coronavirus pandemic spurred residential-shipment levels normally seen during the holiday season.
FedEx shipped 31% more packages a day through its Ground network during the summer months. The extra cargo boosted profit more than 60% for the three months ended Aug. 31.
More consumers are buying products such as laptops and toilet paper online because of temporary store closures and pandemic restrictions. That has primarily been a boon to the FedEx Ground business, which handles shipments for chains such as
Those retailers reported e-commerce sales more than doubled in their latest quarters.
FedEx expects the trend to stick. It now projects an average of 100 million parcels will be shipped daily in the U.S. across all carriers sometime in 2023, compared with its previous forecast of hitting that milestone in 2026.
“The growth we expected to see in three to five years happened in a matter of three to five months,” Raj Subramaniam, the company’s chief operating officer, said on a conference call.
The Express business, which ships packages and cargo by air, received a boost from the sharp decline in international passenger flights, which used space in their bellies to ferry shipments across the globe. With fewer commercial flights, shippers are paying to use jets flown by FedEx or its rivals. International volume in the Express business rose 16%.
After struggling to manage the rise in volume early in the pandemic, FedEx and its main rival,
United Parcel Service Inc.,
are now turning their focus to the holiday season, which will layer another cascade of packages onto already strained networks.
“We believe e-commerce will keep volumes elevated and it will be a record breaking peak,” Chief Marketing Officer Brie Carere said.
The carriers and the U.S. Postal Service are trying to manage the expected shipping volume with new peak surcharges aimed at some of the largest shippers.
The higher fees are also meant to offset some of the added costs of delivering packages and operating during the pandemic. In the latest quarter, FedEx spent about $100 million on protective equipment, additional cleaning and other measures to protect its workers.
Delivery companies are also hiring more workers to help with the expected seasonal surge. FedEx is increasing its annual holiday hiring goal to 70,000 extra workers, up from around 55,000 in previous years. UPS, meanwhile, is hiring about 100,000 workers over the next few months after adding nearly 40,000 earlier this year.
On Tuesday, executives said FedEx is spending about $200 million more this year on capital projects to help handle the increase in business, but they otherwise continued to refrain from providing an earnings outlook for the fiscal year, which began in June.
“While business demand improved in the first quarter, continued uncertainties cloud our ability to forecast full-year earnings,” said FedEx finance chief Alan Graf.
Aside from online shopping, FedEx said that demand from businesses also continues to improve as economies reopen around the world.
For the quarter, FedEx reported earnings of $1.25 billion, compared with $745 million a year earlier. Excluding certain expenses, the company said earnings per share were $4.87.
Revenue rose 13% to $19.3 billion from a year earlier.
The results topped Wall Street’s expectations, and FedEx shares were up more than 9% in after-hours trading. The stock has more than doubled from its March lows.
- Amazon Gets U.S. Approval for Drone Fleet, a Package-Delivery Milestone (Aug. 31, 2020)
- Postal Delivery Delays Trouble E-Commerce Sellers (Aug. 19, 2020)
- FedEx Adds Peak Fees on Shipments During Holiday Season (Aug. 18, 2020)
- The Man Behind the Plan to Remake FedEx (March 12, 2020)
Write to Paul Ziobro at Paul.Ziobro@wsj.com
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Appeared in the September 16, 2020, print edition as ‘FedEx Posts Record Revenue For Quarter on Surge in Packages.’