FDX FedEx Corp

By Paul Ziobro 

FedEx Corp. isn't missing Amazon.com Inc. this holiday season.

Shipping volumes at FedEx's Ground unit surged 29% in the latest quarter, as consumers continued to buy everyday goods online, while retailers urged them to do their holiday shopping earlier than normal against the backdrop of the coronavirus pandemic.

The combination of factors boosted revenue and profits at the delivery company for the three months ended Nov. 30, which included Black Friday. FedEx has raised prices and handled a surge in e-commerce packages this year, even after it publicly split ways in 2019 with Amazon, the biggest online retailer.

FedEx has found more than enough packages to fill its network after parting ways with Amazon, helped by the overall growth of e-commerce during the pandemic and courting of new customers. Online sales rose 33% in the first nine months of 2020, FedEx said, compared with just a 1% gain in overall retail sales, excluding categories such as gas and food services.

FedEx's large Express unit posted a 10% jump in volume from a year ago. It continues to benefit from tight capacity in the air-cargo market, as a severe decline in passenger flights that carried freight in their bellies has cut into supply. Air-cargo companies such as FedEx have been flying fuller jets and charging higher rates as a result.

The delivery company is in the midst of the busiest period for shipping parcels ahead of the holidays, with around 100 million packages dispatched daily across the industry, according to ShipMatrix, a software provider that analyzes shipping data.

Industry data so far show that FedEx and United Parcel Service Inc. have held up against the onslaught well, with on-time delivery performance improving from last year.

However, part of it has come from stricter limits than usual on how many items shippers can tender to the carriers daily. Both companies have temporarily stopped accepting shipments from some retailers, resulting in a backlog at some warehouses.

"All available capacity across the entire industry has been severely constrained," FedEx chief marketing officer Brie Carere said on Thursday's earnings call.

The carriers are also pushing rates up higher and adding new fees to offset the cost of handling so many packages during the pandemic. On Wednesday, FedEx said it would extend some peak-season surcharges that were supposed to expire on Jan. 17 until further notice because it expects costs and demand to remain elevated.

FedEx said the higher revenue was partially offset by higher costs, including safety equipment to protect workers from Covid-19. For its Ground network, that included hiring more workers than usual before the holidays and opening several new facilities, including one the weekend before Thanksgiving, to handle holiday shipping volume.

"Peak preparation expenses were much higher and occurred much earlier than in the past," Henry Maier, chief executive officer of FedEx Ground, said.

For its fiscal second quarter ended Nov. 30, FedEx posted a profit of $1.23 billion, or $4.55 a share, compared with $560 million, or $2.13, a year earlier. Revenue came in at $20.3 billion.

Analysts polled by FactSet on average expected FedEx to post earnings of $4.01 a share on $19.4 billion in revenue.

FedEx continues to withhold its financial forecast for the current fiscal year. Chief Financial Officer Michael Lenz said the company expects earnings to grow in the second-half because of "anticipated heightened demand for our services."

Write to Paul Ziobro at Paul.Ziobro@wsj.com

(END) Dow Jones Newswires

December 17, 2020 18:40 ET (23:40 GMT)

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