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What's going on?
Logistics powerhouse FedEx posted better-than-expected quarterly earnings late last week.
What does this mean?
The pandemic proved that you can package up treadmills, trampolines, and everything in between. But you can’t package up life, which is a sticking point for FedEx: the company’s been delivering fewer products as people opt to spend their money on travel, experiences, and entertainment. FedEx’s ground business – the main driver of the company’s growth – saw average daily package deliveries fall 5% last quarter from the same time last year. And its air freight business was MIA too, with daily deliveries down 11% as Chinese lockdowns took their toll. The good news is that those shortfalls were more than offset by higher prices, which were up 11% and 20% in each respective segment. That helped the company post a better-than-expected quarterly profit, and it rounded things off with an impressive yearly profit outlook too.
Why should I care?
The bigger picture: There’s no such thing as fashionably late.
FedEx probably can’t keep hiking prices as long as demand keeps falling, meaning it’ll need to improve services and operations to squeeze out more profit instead. So it might want to take another look at its delivery success rate: data from ShipMatrix shows the courier’s now delivering 93% of packages on time. That’s up from 89% in December, sure, but arch-rival UPS consistently hits the high 90s.
Zooming out: Britain heads for recession.
There’s another reason demand for FedEx is falling: inflation is cutting the amount of disposable cash people have to spend. Just look at the UK, where data out on Friday showed retail sales were 0.5% lower last month than the month before, even though shoppers spent 0.6% more (tweet this). Meanwhile, separate data showed that UK consumer confidence fell this month to the lowest level on record. Put them together, and some economists think there’s more of a chance that the country’s economy will shrink this quarter and slip into a recession.
Originally posted as part of the Finimize daily email.
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