FedEx says 2Q net income down 30%

1517785877434 Headshot
Updated Jan 21, 2010

FedEx Corp. today, Dec. 17, reported revenue of $8.60 billion for the second quarter ended Nov. 30, down 10 percent from $9.54 billion during the same period a year ago. Operating income was $571 million, down 27 percent from $784 million. Net income was $345 million, down 30 percent from $493 million.

The company said revenue and earnings declined as a result of lower yields, primarily due to a substantial decline in fuel surcharges year over year. Shipment growth, particularly in international express and at FedEx Ground, and strict cost controls benefited results.

“Positive momentum in the global economy and continued execution of our business strategy drove volume growth across all FedEx transportation segments, highlighted by increased international shipments,” said Frederick W. Smith, chairman, president and chief executive officer of FedEx Corp., based in Memphis, Tenn. “We have taken decisive actions during the economic downturn to reduce expenses while expanding our networks in growth markets. We are providing outstanding service levels during our busiest shipping season, thanks to the dedication of our more than 275,000 team members.”

With an outlook for modestly improving economic conditions and business performance, FedEx said it will resume merit salary increases for calendar 2010 as well as a 50 percent resumption of the 401(k) company match for most U.S. employees; these programs were suspended a year ago.

“Our balance sheet is strong, volumes are growing, and we are encouraged by our performance as we emerge from the worst economic downturn in FedEx history,” said Alan B. Graf Jr., FedEx Corp. executive vice president and chief financial officer. “While there is some uncertainty regarding the sustainability of current demand trends after our peak shipping season, we expect our strong operating leverage to provide improved year-over-year profitability in the second half of our fiscal year. Effective cost management remains a priority and should continue to benefit results.”

For the second quarter, the FedEx Freight segment reported revenue of $1.07 billion, down 11 percent from $1.20 billion; and an operating loss of $12 million, down from operating income of $32 million. Less-than-truckload yield decreased 12 percent due to the continuing effects of a competitive pricing environment and lower fuel surcharges. Average daily LTL shipments increased 3 percent year over year, and growth rates improved month over month throughout the quarter. Operating income and margin decreased in the quarter due to the competitive pricing environment, partially offset by higher shipments.