FedEx reported its net profit fell 18 percent in the quarter ending Nov. 30 to $283 million as rising costs and stagnant U.S. domestic demand halted the gains the company had made coming out of the global economic downturn.
The world’s largest express carrier gave an upbeat view of current holiday season demand and upgraded its forecast for 2011, saying the global economy is still improving and that transport yields are growing.
But the setback in net profit came despite a 12 percent improvement in overall revenue in FedEx’s fiscal second quarter to $9.63 billion, and rising costs in operations and for fuel drove the operating profit down 18 percent to $469 million.
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The core FedEx Express business saw revenue grow 13 percent to $5.99 billion, but the operating profit declined 23 percent to $264 million as costs grew and shipping growth leveled off. FedEx said domestic express shipping grew 3 percent compared to the same fiscal quarter a year ago, but total U.S. express package revenue of $2.6 billion was down slightly from the previous quarter and the domestic package yield edged up only 0.8 percent on a sequential basis.
The company’s FedEx Freight trucking unit also reported a $91 million operating loss. Less-than-truckload revenue grew 14 percent over last year and shipments per day expanded 8 percent despite a focus on price increases that pushed yield up 7 percent year-over-year to its highest point in two years.
Memphis-based FedEx raised its earnings outlook for the rest of the year in part because of what Chairman, President and CEO Frederick W. Smith said is “a healthier global economy.”
“Our yield improvement strategy is working, holiday peak season volumes are exceeding our expectations and our economic forecast for calendar 2011 has improved,” Smith said.