FedEx Q4 revenue at $21.9bn, ends fiscal 2023 with $90.2bn revenue
FedEx expecting flat to low-single-digit-percent revenue growth for 2024, $1.8 billion of DRIVE cost savings
FedEx reported a 10 percent decline in fourth quarter revenue at $21.9 billion compared to $24.4 billion in Q42022.
Adjusted net income declined to $1.25 billion from $1.8 billion in Q42022, says an official release.
"FedEx Express operating results declined due to lower global volumes, partially offset by decreased expenses and higher U.S. domestic yields. FedEx Express continues to implement volume-related and structural cost-reduction actions, including further reductions in flight hours and the early retirement of certain aircraft and related assets, to mitigate the negative effect of ongoing demand weakness.
"FedEx Ground operating results improved primarily due to higher revenue per package and cost-reduction actions. These factors were partially offset by lower package volume, higher infrastructure costs and increased other operating expenses.
“FedEx Freight operating results declined primarily due to decreased shipments and lower weight per shipment, partially offset by improved revenue quality. FedEx Freight remains focused on cost discipline, supported by a fourth round of furloughs to match staffing with demand and network optimization from the planned permanent closure of 29 facilities."
Fourth quarter results also include a non-cash impairment charge of $70 million from the decision to permanently retire from service 18 aircraft and 34 related engines to align with the plans of FedEx Express to modernise its air fleet, improve its global network and better align air network capacity with current and anticipated demand, the release added.
2023 revenue down 3%
FedEx reported a three percent decline in revenue at $90.2 billion for the full fiscal year 2023. While adjusted net income dropped to $3.84 billion from $5.50 billion in 2022, capital spending for the year was $6.2 billion.
“The solid close to the fiscal year demonstrates the significant progress Team FedEx has made in advancing our global transformation while adapting to the dynamic demand environment,” says Raj Subramaniam, President and Chief Executive Officer, FedEx. “FedEx is becoming a more flexible, efficient and data-driven organisation as we significantly lower our cost structure, drive enhanced profitability, and deliver outstanding service for our customers.”
For fiscal 2024, FedEx is forecasting:
*Flat to low-single-digit-percent revenue growth year over year;
*Permanent cost reductions from the DRIVE transformation programme of $1.8 billion; and
*Capital spending of $5.7 billion with a priority on investments to improve efficiency, including fleet and facility modernisation, network optimisation and automation.
“In fiscal 2023, we delivered the early benefits of FedEx’s cost and efficiency initiatives, powered by our DRIVE programme,” says Michael C. Lenz, Executive Vice President and Chief Financial Officer, FedEx. “We’re approaching fiscal 2024 with the same level of intensity, maintaining a continued focus on improving profitability to position the company for success in what remains a challenging demand environment.”
All FedEx Ground operations and personnel in Canada will transition to Federal Express Canada starting in April 2024, the release added.
"Canada is a unique market and we're taking a different approach there than the market-by-market approach we take in the U.S," Subramaniam said while answering questions during the analysts call. "The Canadian population is heavily concentrated in a few key geographies and the volume is split roughly 50-50 between Express and Ground. So we made the decision to consolidate everything under Express and it is the right time to take these steps because it will begin in April 2024 and complete by September of 2024. And it's very important that you understand that this is unique to Canada because we are going to take a market-by-market approach in the United States and we’d have a hybrid in the United States between couriers and package handlers. But it's a very important step for us in Canada, it reduces our cost by about $100 million and importantly improves our portfolio and service differentiation."
Lenz to retire
Lenz will retire effective July 31, 2023. An external search is underway for his successor. Lenz will serve as a Senior Advisor at FedEx until December 31, 2023, to help ensure a smooth transition, says an official release.
“On behalf of the entire FedEx team, I want to thank Mike for his 18 years of dedicated service to the company,” says Subramaniam. “Mike has successfully led our finance organisation for the past three years while helping the company navigate a period of significant change. We are grateful for his dedication and tireless work. He is leaving FedEx well positioned for the future as we continue to execute on our transformation.”
Lenz was named CFO in March 2020 and helped lead the company through the global pandemic, the release added. “I am grateful to the FedEx leadership team for the honour and privilege to serve as CFO during this pivotal time in the company’s history,” says Lenz. “FedEx is well positioned for the tremendous opportunities ahead, and I want to thank the entire FedEx team for their hard work and unwavering commitment to lead us here. I have immense optimism for the bright future of this extraordinary company, and I look forward to supporting a smooth transition for my successor.”