Dive Brief:
- FedEx Freight has been growing its home delivery operations, John Smith, FedEx Freight CEO, said during the company's earnings report Tuesday. Smith told analysts FedEx Freight was assisting FedEx Ground with linehaul work, including over-the-road and intermodal work. And three months ago, FedEx Freight delivered its first Ground shipment to a customer.
- The company reported increased revenue per shipment at FedEx Freight and a favorable impact of fuel costs. Those factors helped offset operational losses for the final quarter of its 2020 fiscal year, the company said in its earnings release.
- FedEx Freight grossed $1.6 billion for the quarter ended May 31, down 17% from $1.96 billion in the same quarter in 2019. Operating income for Q4 2020 fell to $132 million, down 32% from $194 million in Q4 2019.
Dive Insight:
"We've grown that very rapidly," Smith of the collaboration between FedEx Ground and FedEx Freight. "The reason that we have played into that so easily is the development of our FedEx Freight Direct. And what that has allowed us to do is to have the right equipment to help our Ground partners on the home delivery side."
Smith said the synergy will help FedEx grow Freight Direct while helping the segment's Ground partners.
Smith's remarks suggest FedEx Freight might have helped ease some of the overall FedEx capacity issues seen during the outbreak of the COVID-19 pandemic in the United States. But the pandemic spared no segment.
"Virtually all revenue and expense line items were affected by the COVID-19 pandemic during the quarter," the company said in the Tuesday news release. "While commercial volumes were down significantly due to business closures across the globe, there were surges in residential deliveries at FedEx Ground and in transpacific and charter flights at FedEx Express, which required incremental costs to serve."
Revenue fell 3%, from $17.8 billion a year ago in Q4 2019, to $17.4 billion in Q4 2020.
Virus-mitigation costs also hit the company, with FedEx spending $125 million on personal protective equipment (PPE) and medical safety supplies, as well as on additional security and cleaning services.
In October, FedEx Freight expanded its Freight Direct program to 80% of the contiguous United States. The pilot program, which delivers bulky items via e-commerce in a last-mile operation, had expanded earlier in 2019. FedEx's LTL segment has delivered furniture, TVs and other bulky items to homes and businesses. It became the first FedEx segment of any kind to deliver through the threshold, into homes, according to a FedEx news released in October.
"Today's consumers are just as comfortable purchasing a television or sofa online as they are groceries or books," said Brie Carere, FedEx EVP and chief marketing and communications officer, in October. "We're seeing more oversized items move through our global network. FedEx Freight Direct is critical to addressing these challenges as part of our growing e-commerce portfolio."
