FedEx posts strong 1st-quarter results, domestic express lags
FedEx Corp. said its profits for its fiscal first quarter ended Aug. 31 nearly tripled to $330 million, up from $128 million in 2003, as worldwide economic growth pushed up demand for its delivery and logistics services.
The Memphis-based company reported operating income of $579 million, up from $200 million during the same year ago period, on a 23 percent rise in revenue to $6.98 billion. A new revenue stream from the acquisition of Kinko’s office centers early this year added $490 million to the sales figures, while last year’s figures included a $132 million charge to cover early retirement and severance programs designed to provide long-term savings. Operating profit margin was 8.3 percent compared with last year’s 3.5 percent.
Revenue for FedEx Express was up 12 percent to $4.62 billion. The unit’s operating income jumped to $310 million from $23 million during first quarter 2003, with an operating margin of 6.7 percent compared to 0.6 percent the previous year. International sales increased 25 percent, while average daily package volume grew 13 percent. Yield was up 8 percent primarily due to an increase in average weight per package, fuel surcharges and favorable exchange rate differences, FedEx said. Domestic package yield grew 6 percent despite a 2 percent drop in daily package volume.
The company's FedEx Supply Chain Services unit also did not do as well. FedEx said the transportation and logistics management unit posted a small operating loss, but did not disclose specific figures.
The FedEx Ground segment had operating income increased 27 percent to $147 million. Revenue rose to $1 billion from $914 million. Average daily package volume improved 16 percent. Yield improved 2 percent primarily due to a January general rate increase and revenue from new services, partially offset by the elimination of fuel surcharges, higher incentives and lower average weight per package.
Operating income at FedEx Freight rose 69 percent to $103 million on revenue of $807 million, up 27 percent. The company achieved an operating margin of 12.8 percent compared to 9.6 percent in the previous year period. Average daily shipment volume increased 14 percent. The less-than-truckload carrier improved yield 7 percent due to small fuel surcharge increases, growth in interregional freight service, a 5.9 percent general rate increase in June and favorable contract renewals.
FedEx forecast $2.1 billion in capital spending in 2005, saying it needed to invest in additional aircraft and infrastructure for FedEx Express to handle growing demand for its expedited international service.