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

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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.

[BENGALURU] 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 per cent 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 per cent to 11.6 million during the fiscal first quarter ended Aug 31.

Revenue per package rose 2 per cent 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.

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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 centers 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 per cent 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 per cent to US$1.28 billion, or US$4.87 per share.

Revenue rose 13.5 per cent to US$19.3 billion.

Analysts expected earnings of US$2.69 per share and revenue of US$17.55 billion.

REUTERS

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