Economic Insights from FedEx’s 4Q23 Results

Jun 26, 2023 | Corporate Insights, No Bull Economics

While consumer spending growth is currently running +7% to +8%, FedEx’s growth is closer to +2% to +3% because of the post-covid e-com reset & economic pressures which are shifting consumer spending share back towards in-store shopping for non-discretionary items (like groceries) & away from online purchases & delivery for discretionary goods.

Macro/Consumer

FedEx reported that the industrial economy is slowing down. Further, due to inflation, interest rates, and a slowdown in global trade, consumer spending is shifting to services from goods.
Also, a post-covid “e-com reset” is slowing online sales/shipping, pressuring FedEx’s volume.
While the company expected that e-com sales would have rebounded by now, expectations for a recovery have been delayed until FY24.
In any case, FedEx believes the U.S. consumer remains strong.

Sales

Total 4Q23 revenues declined -10% y/y, as volumes declined with demand softening across the market.
All-the-same, the rate of volume decline in Ground (-2% y/y) & Express (-13% y/y) improved.
U.S. freight pounds were down -25% y/y partially due to its strategy to pursue smaller customers.
FedEx projects revenue to be up low single-digit percentage for the full year.

Margins

Cost per package increased only +1.9% y/y, reflecting better management of its staffing levels, store closures, consolidations & reduced Sunday operations.

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