FedEx Takes $450M YoY Hit From Increased Labor, Transportation Costs

FedEx, in its first quarter earnings report, has shown operating results negatively impacted by higher operating expenses, which happened due to the pandemic’s air network impact and staffing challenges.

The results also suffered from a decline in the U.S. average daily freight pounds due to a surge in charter flights last year.

The company reported $19.3 billion in revenue for 2021, and $22 billion for 2022.

In addition, operating income was at $1.59 billion as reported for 2021 and, for 2022,  $1.4 billion.

“The execution of our strategies continues to drive higher demand for our services, despite the disruptive impact of the pandemic to labor availability and global supply chains,” said Frederick W. Smith, FedEx Corp. chairman and chief executive officer.

The earnings report goes on to say that the staffing was an issue, which negatively affected the year-over-year results by around $320 million, and operating results had been impacted too, by higher costs related to expansion.

But those costs were at least partially offset by higher revenue per package as well as commercial packages seeing more growth.

FedEx also cut down on its earnings outlook because of the lower first-quarter results as opposed to how the company had made a forecast in June. The conditions during the first quarter, such as the ongoing pandemic, were more challenging than anticipated and may last longer, so FedEx has revised its expectations for the earnings per share.

“Our results for the first quarter reflect higher operating costs we are incurring during this uncertain and challenging operating environment,” said Michael C. Lenz, FedEx Corp. executive vice president and chief financial officer. “While we expect these conditions to continue near-term, we expect a gradual improvement in labor availability combined with our proactive revenue management actions to mitigate the ongoing impact of these headwinds on our results and position us for earnings growth in fiscal 2022.”

FedEx also recently partnered with Salesforce on new initiatives for fast shipping to meet customer demand, giving Salesforce merchants quicker shipping and other features like label-less returns and easy drop off.

See also: Salesforce, FedEx Ink Multi-Year Logistics Partnership for eCommerce Merchants