FedEx profit falls 53%, freight division hit hard
FedEx Corp. said its first quarter profits fell 53 percent to $181 million from the same period in 2008.
Revenue fell 20 percent to $8.01 billion. Operating profit margin was down from 6.3 percent in last year's first quarter to 3.9 percent this year.
'Revenue and profitability continued to be negatively affected year over year by the global recession,' the company said in a statement Thursday. 'Fuel was also a significantly negative factor in the quarter, primarily due to the substantial decline in fuel surcharges year over year. Strict cost controls and one additional operating day at each of the transportation segments benefited results.'
The company said it intends to raise rates 5.9 percent for U.S. domestic and U.S. export services, starting Jan. 4. That increase, FedEx added, will be partially offset by adjusting the fuel price at which the fuel surcharge begins, reducing the fuel surcharge by 2 percent.
Additional changes will be made to other FedEx Express surcharges. Details can be found here.
'While we see signs of improvement in the economy, the year-over-year comparisons will remain very difficult for our second quarter,' said Alan B. Graf Jr., FedEx Corp. executive vice president and chief financial officer. 'We remain focused on managing our expenses and generating positive cash flow.'
In terms of FedEx's segments, its FedEx Express business saw operating income fall 70 percent to $104 million on revenue of $4.92 billion, down 23 percent. The company said global economic weakness in the market was partially offset by DHL's exit from the U.S. domestic package market.
FedEx Ground fared much better. Operating income increasing 7 percent to $209 million, on a 2 percent revenue drop to $1.73 billion. Again the exit of DHL was a factor in FedEx making large market share gains.
FedEx Freight saw operating income plummet to $2 million from $89 million in the first quarter of 2008, as less-than-truckload volume and yield was hammered by the economic downturn and lower fuel surcharges. Revenue in the segment fell 27 percent to $982 million. FedEx's margin in the freight division fell from 6.6 percent to 0.2 percent.