Leaders of FedEx Corp. on Thursday said the company continues to face higher labor costs related to the COVID-19 pandemic and staff shortages, but that the situation is improving as the global shipping giant has managed to hire many more people in recent months.
And the company reported quarterly revenue and earnings per share that exceeded analysts' expectations.
Company leaders have said mass hiring is essential to its current plans, and reported success.
“Last week we exceeded 111,000 applications, the highest level in FedEx history. To put this in perspective, we had 52,000 applications the week of May the eighth," Raj Subramaniam, president and chief operating officer of FedEx, said in a phone call with analysts.
“That has led to appropriate levels of staffing for peak (season), including hiring more than 60,000 front-line team members since we last spoke in September.”
At that time, he and other FedEx leaders had said the company didn't have enough people to do the job, and that it's had to pay higher wages, pay contractors and reroute packages around short-staffed areas, driving up costs. The company said the problems had cost $450 million during the quarter and contributed to a dip in profits.
But on Thursday, Subramaniam said the increased staffing is helping the company reduce the expensive practice of rerouting packages away from short-staffed facilities. “Even as we speak, we are re-routing packages back to what it should be in the first place. And that’s what’s going to make the difference.”
The company leaders said the labor shortage and related factors increased the company's costs by $470 million in the September-through-November quarter compared to a year ago, but they predicted fewer labor-related problems going forward.
During the three-month period that ended Nov. 30, FedEx posted revenue of $23.5 billion and adjusted net income of $1.3 billion. Expressed as adjusted, diluted earnings per share, that's $4.83.
On average, analysts had predicted quarterly revenue of $22.5 billion and earnings per share of $4.23, according to investment research firm Zacks.
The company's $23.5 billion in reported revenue was up from $20.6 billion in revenue in the year-earlier quarter. The adjusted net income in the most recent quarter was the same as the year-earlier quarter.
More on the September results: FedEx cites higher labor costs, shortages as profits dip in first fiscal quarter
In a phone call with analysts, Michael C. Lenz, the company's executive vice president and chief financial officer, said the financial results in the quarter that ended Nov. 30 had exceeded the company's expectations, though uncertainty remained in many areas, including the labor market.
"We are closely monitoring developments related to the federal vaccine mandate, ongoing pandemic developments and inflation as we consider our outlook," he said. He said labor challenges will persist during the current quarter, but the problems should improve.
The company boosted its earnings outlook for the year and also announced a $5 billion share buyback program.
The global shipping giant is the largest employer in the Memphis area. The release of the quarterly results comes during the company's busiest time of year, the holiday shopping season.
By the numbers
FedEx Express is the biggest company under the FedEx corporate umbrella and uses planes and other vehicles to transport packages – its revenue rose to $11.6 billion, up from $10.4 billion in the year-earlier quarter.
Its operating income increased to $949 million, up from $900 million a year earlier.
Revenue at FedEx Ground, a company that mostly transports products by truck, rose to $8.3 billion up from $7.3 billion in the year-earlier quarter. Operating income dropped to $481 million, down from $552 million in the year-earlier quarter.
FedEx Freight, a company within FedEx that handles bulk shipping, saw revenue increase to $2.3 billion, up from $1.9 billion in the year-earlier quarter.
In this segment, operating income increased to $334 million, up from $252 million a year earlier.
Daniel Connolly is covering FedEx for The Commercial Appeal and welcomes tips and comments from the public. Reach him at 529-5296, email@example.com, or on Twitter at @danielconnolly.
This article originally appeared on Memphis Commercial Appeal: FedEx quarterly earnings exceed analysts' expectations