FedEx's profit jumps as residential deliveries soar

NEW YORK (AP) — FedEx's profit jumped 67% in its latest quarter, as online shopping soared among customers avoiding stores and shipments between businesses improved.

The delivery giant reported Tuesday that it earned $1.25 billion during the three months that ended Aug. 31, FedEx's fiscal first quarter. That was up from $745 million a year earlier.

Its revenue rose to $19.32 billion, up 13% from $17.05 billion in last year's quarter.

“The growth that we expected to see over a period of three to five years happened in a period of three to five months,” said Raj Subramaniam, president and chief operating officer at FedEx, in a conference call with investors.

Delivery of large packages, furniture and high-value electronics to homes increased, said Brie Carere, executive vice president and chief marketing and communications officer. Shoppers who are over 65 years old “finally moved to online,” and “from an e-commerce perspective I do not anticipate that these buying behaviors will revert back” after the pandemic, she said.

FedEx's earnings amounted to an adjusted $4.87 a share. That was well ahead of the $2.70 per share expected on average by Wall Street analysts polled by FactSet.

FedEx's stock jumped 8% in after-hours trading.

Many people are shopping online during the pandemic, which is helping some delivery companies despite widespread economic pain.

“Not all facets of the economy are great right now, far from the case, but when you think about the rising tide that is e-commerce, it’s definitely a powerful thing for a company like FedEx to harness, given the delivery network they have that’s ready to go,” said Matt Arnold, industrials analyst for Edward Jones.

But delivery to homes is less profitable than those between businesses, and business deliveries slowed as the pandemic dragged on and some establishments remained shuttered. FedEx also saw some expenses increase as it purchased personal protective equipment and enhanced cleaning routines to keep its workers safe.

The Memphis-based company did not provide an outlook for the full 2021 fiscal year.

“While business demand improved in the first quarter, continued uncertainties cloud our ability to forecast full-year earnings,” said Alan B. Graf, Jr., FedEx's chief financial officer.

Revenue in its core Express segment grew to $9.65 billion in the quarter, up from $8.95 billion at the same time last year. Its Ground service grew to $7.04 billion in revenue, up from $5.18 billion at the same time last year.

FedEx is raising its shipping rates by 4.9% for its Express, Ground and Home Delivery services and 4.9% to 5.9% for Freight, beginning in January.

“We’re going into the so-called peak delivery season for the holiday, and we’re seeing e-commerce growth that looks like the holidays, so it’s giving them confidence that they can raise their prices,” Arnold said.

FedEx also has said it plans to hire up to 70,000 seasonal workers to handle extra holiday deliveries, a jump from 55,000 last year.