FedEx
Miscellaneous
FedEx told analysts the company was still benefitting from price increases and constrained supply
FedEx’s CEO told analysts the company “experienced modest revenue growth driven by higher yields as a result of pricing actions and improved volume mix.” “Raj Subramaniam — President and Chief Operating Officer: Turning to express. Even in the face of higher operating expenses related to inflationary pressures, we delivered improved quarterly operating income and revenue. Thoughtful execution of our new revenue management actions has allowed us to overcome headwinds from COVID lockdowns in Asia and geopolitical uncertainty in Europe. At FedEx Ground, we experienced modest revenue growth driven by higher yields as a result of pricing actions and improved volume mix.” (FedEx Q4 2022 Earnings Call, 6/24/2022)
A FedEx executive said that limited air transport capacity was “resulting in a pricing environment still favorable to FedEx.” “Brie Carere — Executive Vice President and Chief Marketing and Communications Officer: We do anticipate supply chain disruptions throughout the fiscal year. We continue to expect passenger airlines to fully recover to pre-COVID levels, and that, that recovery will take some time. Belly capacity on passenger airlines is expected to remain constrained in fiscal year 2023, resulting in a pricing environment still favorable to FedEx if a little less than before. The Europe to Asia lane is estimated to recover in Q1 calendar year ’24, and belly capacity on trans-Pacific airlines is estimated to recover in Q3 calendar year ’24.” (FedEx Q4 2022 Earnings Call, 6/24/2022)
FedEx told analysts it planned to make additional surcharges permanent, noting they were big contributors to their revenue
A FedEx executive described new “e-commerce peak surcharges” as “durable changes” and said the company adjusted a fuel surcharge on delivery weekly: “I am confident we have the tools to continue getting inflation plus pricing.” “Brie Carere — Executive Vice President and Chief Marketing and Communications Office: We expect the pricing environment will remain rational here in the United States and also around the world. We believe that the systemic changes, especially e-commerce peak surcharges, are durable changes for the industry. We are closely monitoring both inflation and fuel prices. And as a reminder, we adjust our fuel surcharge weekly in response to market rates. I am confident we have the tools to continue getting inflation plus pricing. Strong revenue quality is possible because we will target customers who value FedEx’s unique capabilities. Let me talk about four of our favorite capabilities. First, we’re the only provider to bundle our parcel and LTL portfolio.” (FedEx Q4 2022 Earnings Call, 6/24/2022)
A FedEx Executive described fuel surcharges as “the largest driver of revenue quality.”
Jordan Alliger — Goldman Sachs – Analyst: Hi, everyone. So yields were very strong, as you noted, across the board. Is there any way to at least give some big picture view how to think about the components of the yield improvement, whether it be fuel surcharge, core price, mix as you referred to revenue management or other surcharges? Just some picture how to think about these very large improvements.
Brie Carere — Executive Vice President and Chief Marketing and Communications Officer: Thanks, Jordan. Appreciate the question. So specifically for Q4, fuel was the largest driver of the revenue quality. We also did a — quite frankly, as I mentioned earlier, I thought the team just did a tremendous job within our portfolio of managing to hold on to the — really our best and most profitable volume. (FedEx Q4 2022 Earnings Call, 6/24/2022)
FedEx crowed about its ability to raise prices and impose extra surcharges on customers
FedEx President: “Firstly, the first and most important point is the demand for our services is very robust. The pricing environment is very robust… So, we expect in the second half, our profit and operating margins to improve year-over-year and we get double-digit.” “Raj Subramaniam — President and Chief Operating Officer: And Ken, let me add to that by saying this much. Firstly, the first and most important point is the demand for our services is very robust. The pricing environment is very robust. The labor headwinds start to recede in the second half. The investments that we have made get more efficient as we go into the second half and the technology investments that make us more efficient as well. So, we expect in the second half, our profit and operating margins to improve year-over-year and we get double-digit. So, I guess that answers that question.” (FedEx Corporation Q2 2022 Earnings Call, 12/17/2021)
FedEx CFO: “certain surcharges that we announced back in September, first of those hit in November. So, we only had one month in the second quarter, so that will hit the whole year, as well as the ongoing contract renewal.”“Mike Lenz — Executive Vice President and Chief Financial Officer: So Chris, let me go at it this way. So, first the three key components for driving the second half of the year are the pricing initiatives, the labor aspects that we just covered, as well as the headwinds we had in second half of last year. So, as Brie mentioned, we’re being very thoughtful about the various pricing levers and initiatives. So, recall that the GRI goes into effect in January and that the surcharges — certain surcharges that we announced back in September, first of those hit in November. So, we only had one month in the second quarter, so that will hit the whole year, as well as the ongoing contract renewals. ” (FedEx Corporation Q2 2022 Earnings Call, 12/17/2021)
FedEx President: “We are in the middle of a very robust market and a pricing environment.” “Raj Subramaniam — President and Chief Operating Officer: The core business is very strong. We are in the middle of a very robust market and a pricing environment. As I’ve said before, on the e-commerce market growth, we are in the center of it. We are in the center of this ecosystem and this has got both volume and yield opportunities. Our core B2B business is very strong. In addition to that, we have three levers. One is the ability for us to optimize across our operating companies and to make sure the right package goes in the right network and be very smart about how we spread our assets and use our capacity. ” (FedEx Corporation Q2 2022 Earnings Call, 12/17/2021)
FedEx EVP: “Just want to kind of just double-click on the pricing environment in the back half… We’re expecting a higher than normal capture of our general rate increase. We are making structural changes in all of our contracts as we move forward.” “Brie Carere — Executive Vice President, Chief Marketing and Communications Officer: Yes, absolutely. Just want to kind of just double-click on the pricing environment in the back half. Yes, the comps are aggressive, but we still believe that there is upside from a revenue quality perspective. We’re expecting a higher than normal capture of our general rate increase. We are making structural changes in all of our contracts as we move forward. We’re just over 50% now of our customer base that we have renewed, so we still have some work to do there and some upside potential.” (FedEx Corporation Q2 2022 Earnings Call, 12/17/2021)
FedEx EVP: “Constrained capacity has continued to support a favorable pricing environment. We are maintaining a brisk pace for repricing contracts, ensuring a high surcharge capture and yield improvements.” “Brie Carere — Executive Vice President, Chief Marketing and Communications Officer: Thank you, Raj. Good afternoon, everyone. Q2 delivered our second consecutive quarter of 14% revenue growth, demonstrating the strong demand for our differentiated portfolio and our ability to drive revenue quality as a result. Constrained capacity has continued to support a favorable pricing environment. We are maintaining a brisk pace for repricing contracts, ensuring a high surcharge capture and yield improvements. We are working with large customers to identify opportunities, to move their volume from our national network to our regional and local networks, freeing up additional capacity for small business customers. (FedEx Corporation Q2 2022 Earnings Call, 12/17/2021)
FedEx EVP: “Our general rate increase will take place in January and we expect a strong capture rate. In January, the Ground Economy peak surcharge will be replaced by the new Ground Economy delivery surcharge at a $1, solidifying the price point for our Economy product.” “Brie Carere — Executive Vice President, Chief Marketing and Communications Officer: Small businesses relied on our market-leading transit times in our seven-day a week network to compete. They cannot forward deploy inventory at the same scale as large retailers. Our domestic yield growth was 9.1% with fuel in Q2. Our general rate increase will take place in January and we expect a strong capture rate. In January, the Ground Economy peak surcharge will be replaced by the new Ground Economy delivery surcharge at a $1, solidifying the price point for our Economy product. And as a reminder, FedEx Ground Economy was formerly FedEx SmartPost.” (FedEx Corporation Q2 2022 Earnings Call, 12/17/2021)