Is FedEx a “canary in a coal mine”?

Sep 29, 2022 | Corporate Insights, No Bull Economics

Banner

•As a bellwether for the domestic & global economy, FedEx provides key insights into shipping volumes. The company recently sent a scare throughout Wall Street by reporting FY1Q23 financial weakness attributed to the economy (although criticism of its management strength is also notable). 

•Corporate reported that its fiscal 1Q23 (ending 8/31/22) financial results were adversely impacted by global volume softness that accelerated in the final weeks of the quarter due to weakening economic conditions. Fuel surcharge increases & a +5.9% pricing increase more than offset the volume decline, driving a +6% sales increase. All-the-same, weak fundamentals drove a -1.5% y/y decline in its adjusted operating margin.

•Operating income for its FedEx Express unit declined -69% y/y, driven by an -11% y/y reduction in global package & freight volume which reflected: Chinese lockdowns; post-Ukraine European challenges (recession looks likely); and efforts of companies to understandably shorten their supply chains. Corporate seeks to cut $1.5B – $1.7B in costs from this unit during FY23 by cutting global flight hours. 

•During FY1Q23, real retail sales (including auto) declined -3.1% y/y through July 2022 (after growing +4.6% & +10.8% in FY21 & FY22, respectively), “pacing to have the worst decline since The Great Recession”. Corporate plans to close 100 retail locations & pause hiring until the economic uncertainty clears up.

•Conversely, its ground transportation business has rebounded to pre-pandemic levels, driven almost exclusively by e-commerce (as opposed to B2B).

FedEx Financials Chart

Follow us on LinkedInTwitterFacebook, and YouTube!

Disclaimer of Liability
No Bull Economics
Restaurant Research

Email Sign-up

Jack in the Box Corporate Insights

Jack in the Box results reflected an improvement in: dining room openings (60% of system); innovation, upsell & add-ons sales; digital progress which is helping frequency; and late-night.

How to Circumvent Food Shortages?

The vulnerabilities of a long-distance supply chain have become very evident over the last couple of years, especially when it comes to farming.

This Week in Summary 11/18/2022

We want to spotlight Target this week which provides valuable insight on consumer spending.

How Would You Value the Federal Reserve?

Here is an idea: let’s take the Federal Reserve public in the world’s largest IPO.

How to Pass Along Inflationary Costs Without Losing Traffic?

Wendy’s is avoiding standardized menu price increases and turning to strategic increases designed not to price out lower income consumers.

Investors in Retail Stocks Think Consumers are Back

Recent retail stock gains would suggest that investors are confident in consumer strength, despite continuing inflationary issues.

Papa John’s & Chili’s Reveal the Plight of Cash Strapped Consumers

The relevant question remains whether consumers who are increasingly cash-strapped can be convinced to pay more for higher quality levels?

This Week in Summary 11/11/2022

Market melt up & the midterm elections

DoorDash’s Grip on Labor Costs is Funding New Investments

Doordash’s platform generated +10% of all restaurant industry sales.

3Q Results for Bloomin’, Texas Roadhouse & Cheesecake

Full serve restaurant sales performance is currently a function of customer demographics.

Digital Marketing Opportunities
Restaurant Research

A Restaurant Research LLC Company