Executive Vice President and CFO at FedEx
Thank you, Brie. While revenue was up 6% for the quarter, profitability was challenged with operating income down 18% on an adjusted basis and adjusted operating margin, down 150 basis points year-over-year. At Express, adjusted operating income declined 72% due to lower average daily package and freight volume and increased expenses as cost reductions lagged volume declines. These factors were partially offset by yield management actions, including higher fuel surcharges. Package yield including fuel grew 16% year-over-year.
Turning to Ground, operating income increased 3%, primarily due to yield improvement and home delivery volume growth. Yield including fuel grew 12% year-over-year. These factors were partially offset by higher operating expenses, driven by increased purchase transportation and other operating expenses. Freight delivered another strong quarter with operating income increasing over 67%, as the Freight team continues to execute. This was driven by yield management actions, including higher fuel surcharges. Yield including the surcharges grew 27%. This was partially offset by higher salaries and employee benefits, as well as lower shipment volumes.
To address the changed environment, we're focused on what's within our control and moving with urgency to take cost out of the network. Our team is operating at speed to identify cost saving opportunities and accelerate their implementation. The $2.2 billion to $2.7 billion fiscal '23 savings we're targeting are relative to our initial plans heading into the year. The majority of this year's savings will come from Express where the demand change has been most pronounced.
We expect about $1 billion of our fiscal '23 savings to be permanent in nature with slight reductions the largest component along with corporate and back office costs. These permanent cost reductions were not part of the Deliver Today, Innovate For Tomorrow strategy we shared in June, which is about how we structurally optimize our networks. These reductions are directly related to flexing in a changed environment with a view to build back differently in the future. As Raj mentioned, we remain committed to the profit improvement objectives we shared at our June investors meeting. We have launched efforts to accelerate initiatives, identify incremental opportunities and implement metrics to track progress under the Drive program.
So next, I'll give more details on the targeted $4 billion savings by fiscal '25 enabled by Drive. About $1.4 billion of the total will come from the FedEx Express operating expenses. Four largest areas of opportunity we are actively advancing are first, restructuring the air network by reducing routes and more efficiently deploying crews, aircraft and commercial line-haul. Next optimization of sort, surface linehaul and on-road designed to improve efficiency, asset utilization and service. Next, driving efficiencies of Europe as we've discussed previously. And lastly, harmonizing global clearance processes to lower cost.
About $1.1 billion of the total will come from FedEx Ground operating expenses by a dock productivity initiatives, network and linehaul efficiencies and reduced liability costs. And approximately $1.5 billion will come from shared and allocated overhead expenses led by procurement savings, back office automation and infrastructure modernization, increased deployment of digital self-service and further consolidation of shared service functions. Moving to our capital spending plans, we reduced our forecast for capital spend for fiscal 2023 to $6.3 billion compared to our prior $6.8 billion forecast. We are intensely focused on allocating capital to the most attractive ROIC initiatives.
Our liquidity remains a source of strength as we ended the quarter with $6.9 billion in cash and based on our cash flows and liquidity, we remain committed to our capital return strategy, including our plan to repurchase $1.5 billion of stock in fiscal 2023. We expect to purchase $1 billion in the second quarter. Our capital return strategy reflects our confidence in our business despite the headwinds we are currently navigating, a significant flexibility to maintain our balanced capital allocation and preserve a resilient balance sheet.
Now, turning to second quarter guidance. While we continue to drive aggressive cost reduction actions, we expect business conditions to remain challenging in the second quarter. As a result and consistent with the update we provided last week, currently expecting revenue of between $23.5 billion to $24 billion in the fiscal second quarter and adjusted earnings per share excluding costs related to business optimization and realignment initiatives of $2.75 or greater in the second quarter. For the remainder of the year while we are not providing guidance given current uncertainties, our plan is based on an expectation that weak trends we saw in late Q1 will persist across our major geographies. This is embedded in our guidance for the second quarter and driving our cost takeout initiatives for the fiscal year.
Longer term, we remain committed to our fiscal 2025 targets for operating margin improvement, return on invested capital and capital intensity that we shared with you in June. We're leaning more heavily into cost actions to get for those goals. The start of the year presented greater than expected challenges, but I can assure you that we are moving with urgency to address these pressures, while remaining focused on creating long-term value by prioritizing revenue quality, expanding margins and elevating financial returns through profitable growth and reduced capital intensity.
And with that, we'll open it up for your questions.