Focus on DRIVE, revenue quality improves FedEx operating income

FedEx reported a 19 percent increase in operating income at $1.24 billion for the third quarter ended February 29 on execution of the company's DRIVE programme and the continued focus on revenue quality.

While revenue declined two percent to $21.7 billion, operating margin increased to 5.7 percent from 4.7 percent during the same period last year, says an official release.

“FedEx delivered another quarter of improved profitability in what remains a difficult demand environment, reflecting outstanding service and continued benefits from DRIVE,” says Raj Subramaniam, President and Chief Executive Officer, FedEx. “We are making meaningful progress on our transformation, while strengthening our value proposition and improving the customer experience. I've never been more confident in our path ahead as we build a more flexible, efficient, and intelligent network.”

FedEx Express operating results improved (up 110 percent at $256 million) due to lower structural costs resulting from DRIVE initiatives and the benefit from one additional operating day, partially offset by lower revenue, the release added.

"FedEx Ground operating results increased (up 14 percent to $964 million) "due to lower structural costs resulting from DRIVE initiatives, higher base yield, and reduced self-insurance costs. Cost per package was flat as lower line-haul expense and improved dock productivity offset higher first- and last-mile costs."

FedEx Freight operating results decreased (down 12 percent at $340 million) due to lower fuel surcharges, reduced weight per shipment and lower shipments, partially offset by higher base yield and the benefit from one additional operating day. Last year's third quarter operating income included a $30 million gain on the sale of a facility, the release added.

fdx launch in fall
FedEx announced the launch of fdx, "the first commerce platform for retailers that connects the entire customer journey."

Subramaniam says: "It will provide real time visibility to help our customers optimise and grow their business, leveraging our analytical capabilities and data from the 15 million packages we deliver every day."

John Dietrich, EVP and Chief Financial Officer, says fdx launch will make it easier "for companies to grow demand, increase conversion, optimise fulfilment and streamline returns. Official launch is planned for fall 2024."

The latest progression of its merchant logistics play follows the company’s 2020 acquisition of eCommerce platform ShopRunner, reports pymnts.com.

The new platform comes as the company increasingly looks to compete in logistics with Amazon amidst growing competition in the landscape, the report added.

The following digital capabilities will be available to help merchants through fdx:

*Grow consumer demand. Connect with high-value customers through the ShopRunner member network.

*Increase conversion. Share estimated delivery dates and time window updates throughout the shopping experience – on product pages, in cart, and at checkout to increase delivery transparency and encourage conversion.

*Improve visibility and control of shipments. See shipments in near real time to make informed decisions and manage risk through FedEx Surround.

*Understand carbon emissions impact. Access detailed carbon emissions data through FedEx Sustainability Insights to help make more sustainable supply chain decisions; and

*Streamline returns. Streamline, configure, and manage digital front-end return experiences, data exchange, and physical transportation for returns in one platform.

2024 outlook
For fiscal 2024 (June 2023-May 2024), FedEx expects:

*A low-single-digit percentage decline in revenue year over year;

*Permanent cost reductions from the DRIVE transformation programme of $1.8 billion;

*Capital spending of $5.4 billion compared to the prior forecast of $5.7 billion with a priority on investments to improve efficiency including fleet and facility modernisation, network optimisation, and automation.