FedEx lays groundwork for e-commerce holiday deliveries

June 23, 2016 02:12 PM

FedEx Corp. is deep in holiday preparation mode, with work on its e-commerce package delivery strategy well underway, Mike Glenn, president and CEO of FedEx Services, told analysts on the shipping carrier’s fiscal Q4 and fiscal 2016 earnings call, according to a transcript from Seeking Alpha.

“We're deep into preparations for the upcoming 2016 peak season. We're closely collaborating with large e-tail and retail customers to understand their peak shipping needs, including geographic mix and package characteristics, so that we can once again have our resources positioned and ready to provide outstanding service,” Glenn said.

“We will also be leveraging some new and evolving services to meet the heavy demand during peak, including FedEx Delivery Manager, FedEx SameDay and an expansion in FedEx Hold at Location Services,” he said on the call. Delivery Manager lets U.S. package recipients customize home deliveries by changing the time and location, requesting a signature upon delivery or leaving instructions for the courier. FedEx SameDay service is in 24 U.S. markets and FedEx Hold at Location offers package pickup at more than 2,400 FedEx locations, including more than 1,800 FedEx office retail stores.

Glenn also addressed Inc., No. 1 in the Internet Retailer 2016 Top 500 Guide, which now handles some of its own deliveries. “Amazon continues to be a valuable customer and they’re among the large e-tailers that we stay in close dialogue with throughout the year to understand their transportation needs as they continue to experience significant growth and generate demand for FedEx transportation,” Glenn told analysts. “Because of our close relationship with Amazon and close collaboration, we have a very clear and specific understanding of their needs across the FedEx portfolio during FY17, and further we expect them to be a significant customer for many years to come. Having said that, it is important to remember that no single FedEx customer represents more than approximately 3% of total revenue.”

E-commerce orders helped FedEx increase total revenue 7.2% to $12.98 billion in its fiscal fourth quarter ended May 31 compared with $12.11 billion in the year-ago quarter. For fiscal 2016, revenue was up 6.2% to $50.37 billion from $47.45 billion in fiscal 2015.

FedEx Ground revenue in the quarter increased 20.2% to $4.29 billion from $3.57 billion. For fiscal 2016, FedEx Ground revenue grew 27.7% to $16.57 billion from $12.98 billion.

Effective June 1, FedEx began imposing a surcharge on more large items. The fee kicks in on items longer than 48 inches; the previous size threshold was 60 inches. “We're considering other options that would be appropriate for that space,” Glenn said. “Business continues to be robust. There are plenty of stories of companies out there that are being successful in non-traditional e-commerce retail segments, which would be packages that are typically larger like mattresses and other things like that. We're happy to handle that, but we expect to be compensated for the service that we provide.”

An analyst asked about Wal-Mart Stores Inc.’s recent decision to make Shipping Pass, a pilot delivery program, a two-day instead of a three-day shipping service and the retailer’s plans to rely on regional carriers to handle last-mile delivery on some orders. Wal-Mart (No. 4 in the Top 500) is a longtime and growing FedEx customer, Glenn replied, and FedEx expects that to continue. “Regional carriers simply don't have the scope and the scale to be able to compete with the networks that make up 95% of the e-commerce shipments in the U.S.,” he said, referring to FedEx, United Parcel Service Inc. and the U.S. Postal Service. “There's a role for regional carriers, but they cannot compete, in our opinion, with FedEx over the long haul.”

More broadly on e-commerce, Glenn said, “If you were to isolate the FedEx e-commerce business, it would become clear FedEx is one of the most profitable e-commerce companies in business today.” He noted that in the past quarter, FedEx expanded its global transportation portfolio and e-commerce capabilities with the acquisition of parcel delivery company TNT Express, which is based in Holland operates throughout Europe and beyond, and a the relaunch of FedEx CrossBorder (formerly Bongo International).

For the fiscal fourth quarter ended May 31, FedEx reported:

  • Total revenue of $12.98 billion, up 7.2% from $12.11 billion last year.
  • FedEx Ground revenue of $4.29 billion, up 20.2% from $3.57 billion.
  • Revenue from its FedEx Express segment of $6.72 billion, up 0.3% from $6.70 billion.
  • Net loss of $70 million compared with a loss of $895 million.

For fiscal 2016 ended May 31, FedEx reported:

  • Total revenue of $50.37 billion, up 6.2% from $47.45 billion last year.
  • FedEx Ground revenue of $16.57 billion, up 27.7% from $12.98 billion.
  • Revenue from its FedEx Express segment of $26.45 billion, down 2.9% from $27.24 billion.
  • Net income of $1.82 billion, up 73.3% from $1.05 billion.



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