- FedEx Freight is helping the overall company cope with surging parcel and FedEx Ground volumes, as it provided more than 20 million miles of road and intermodal support for FedEx Ground in the company's first quarter in its new fiscal year, said COO Raj Subramaniam during Tuesday's earnings call.
- FedEx Freight delivered more than 750,000 shipments for FedEx Ground in its Q1, which ended Aug. 31. "To put this in perspective, Freight had never delivered a Ground package before May of this year," said Subramaniam. The efforts by FedEx Freight helped the company better manage its expenses, and that led to a 56% jump in operating income over Q1 2020.
- The boom in FedEx's parcel business in the Q1 tide lifted FedEx Freight too, as its operating income increased 41%, despite a 9% decline in average daily freight shipments, the company reported.
Freight, Ground and urgent delivery functioned in concert during the pandemic and wildfires on the West Coast, FedEx officials said Tuesday.
FedEx Freight was able to grow its assistance to Ground "very rapidly," according to FedEx Freight CEO John Smith, who told analysts on June 30 that the reason the cooperation was so easy was because of the development of FedEx Freight Direct, which delivers bulky items via e-commerce in a last-mile operation. FedEx Freight Direct expanded in 2019, and delivers to 80% of the contiguous United States.
FedEx Freight grew its home delivery operations in the previous quarter. FedEx Freight assisted FedEx Ground with linehaul work, including over-the-road and intermodal work.
The synergy will be ready when a coronavirus vaccine is approved and shipped around the world, FedEx officials said, noting the company has 90 cold-storage facilities.
FedEx declined to provide an earnings forecast for fiscal 2021 because of the pandemic and related uncertainty. The pandemic has slowed FedEx commercial business, but it also created more demand in residential deliveries.
But FedEx CFO Alan Graf said he is "extremely optimistic about the future," with a nod to questions around capital investments. His retirement plans were announced in March, and Tuesday was his final earnings call.
That future includes increased freight rates. FedEx said on Monday it would raise rates in January, in a sign that volume is pressuring costs.
The company said higher rates would allow "service enhancement, fleet maintenance [and] technology innovations." FedEx Freight will introduce a High Cost Service Area Surcharge in some U.S. zip codes. And some U.S. locations will have an International Out-of-Delivery-Area Surcharge or an International Out-of-Pickup-Area Surcharge, when using FedEx International Express Freight. FedEx is also changing the FedEx Freight fuel surcharge, and it will enforce a late fee for FedEx Express and FedEx Ground invoices, beginning January 2021.