FedEx reinstates 2022 profit target, shares soar

[LOS ANGELES] US delivery firm FedEx reinstated its original fiscal 2022 forecast on Thursday (Dec 16), even as persistent labour woes chipped away profits ahead of the peak holiday season when the number of packages it handles often doubles.

Shares in the company, which also reported flat year-over-year adjusted profit for the fiscal second quarter, were up 5 per cent to US$250.50 in after-hours trading.

FedEx chief operating officer Raj Subramaniam said labour pressures should ease going forward.

"We are essentially staffed up for peak," said Subramaniam.

He added that the carrier believes it can retain required labour for the remainder of its fiscal year.

Concerns have eased that this year's festive season could see a repeat of 2020's "Shipageddon" pandemic delivery delays.

Retailers have reduced the pressure on carriers like FedEx and United Parcel Service by urging early shopping and expanding pick-up and gig-delivery options. At the same time, most stores remain open despite accelerating numbers of Omicron variant infections.

Memphis, Tennessee-based FedEx now expects full-year earnings, excluding items, of US$20.50 to US$21.50 per share, as it had first forecast. In September, FedEx lowered that range to US$19.75 to US$21 per share.

Adjusted net income was US$1.3 billion, or US$4.83 per share, for the quarter ended Nov 30, unchanged from the year earlier.

During the company's fiscal second quarter, labour shortages again disrupted normal work flows - resulting in network inefficiencies, higher purchased transportation costs and higher wage rates. Those factors increased costs by an estimated US$470 million year-over-year, primarily at FedEx Ground. The company put those costs at US$450 million for its fiscal first quarter.

In the latest quarter, FedEx paid "significantly" higher taxes, but benefited from lower fuel prices.

Revenue increased 14 per cent to US$23.5 billion, fuelled in part by elevated demand for e-commerce home deliveries - including some holiday gifts.

Experts and some customers said FedEx is trailing UPS and the US Postal Service in on-time deliveries, however.

"FedEx delivery times are really lagging and I believe it's due to their staffing issue," said Cathy Morrow Roberson, president of consultancy Logistics Trends & Insights.

From Nov 14 to Dec 4 - which included the Thanksgiving and Cyber Monday holiday shopping days - on-time performance was 85.7 per cent for FedEx, 96.4 per cent at UPS, and 95.1 per cent for the US Postal Service, according to delivery invoice auditor ShipMatrix.

Results for the week of Dec 5 so far appear to be mostly in line with prior weeks, ShipMatrix founder Satish Jindel said.

FedEx's Ground deadline for Christmas delivery was Wednesday, Dec 15.

REUTERS