As the holiday shipping (not to be confused with shopping) season kicks into high gear, straining major shipping and logistics providers, FedEx is reportedly attempting to raise its prices from its customer base to fix flat revenue — and companies that won’t pay up are getting the boot.
Quarterly profits at FedEx have reportedly been dampened by spending on four new major distribution centers and 19 new automated sorting stations this year, along with funding for the additional holiday staffing. FedEx said it intends to hire some 50,000 seasonal employees to help it cope with excessive holiday traffic this year.
Fred Smith, chief executive of FedEx, was quoted as saying, “You can get a lot of volume that is completely non-compensatory and just not make any money. There are a large number of transportation and logistics companies that prove that every quarter, making no money.”
Shares of FedEx fell 3 percent after hours to $192.83, after gaining 33 percent for a record high last week, said the Wall Street Journal. FedEx is intentionally trying to avoid another seasonal shipping spike after the company struggled to manage a massive 15 percent increase in volume during last year’s holiday shipping frenzy.
“The rapid growth of eCommerce has driven significant shifts in demand over the last several years. Last year, we experienced 15 percent growth in peak season volume and delivered more than 325 million packages,” said T. Michael Glenn, FedEx’s executive vice president of market development and corporate communications.
In FedEx’s latest quarter, profit was flat from a year ago. Revenue gains were offset by higher spending, and expenses outpaced revenue in its ground and freight businesses in the quarter ending on Nov. 30. FedEx's operating profit margin was pushed down to 7.8 percent in the quarter from 9.1 percent in the same period a year earlier.
FedEx has also reported $14.7 billion in revenue and a $715 million profit in its Q1 2017 earnings call. Those numbers were a jump in revenue from $12.3 billion during the same quarter last year and $692 million in profit from the same period.