FedEx must stay “lean and flexible” to improve competitiveness and overcome challenges from theworld economy, founder and CEO Fred Smith declared this week after the company announced a
voluntary redundancy programme in the USA.Smith, whose pay nearly doubled to $13.7 million in the year ending May 2012 due to variouslong-term incentives, said in the 2012 Annual Report that the company had shown “real grit” overthe last year, with a 40% earnings per share rise and a 9% revenue rise to $42 billion “despitepolitical gridlock in the United States, financial turmoil in Europe, a slowing Asian economy andvolatile fuel prices”.
Looking back, he highlighted FedEx Ground’s “stellar year”, with an 18.4% operating profitmargin driven by online shipments, and said the unit’s overall U.S. ground parcel market share,including FedEx SmartPost, had nearly reached 30%, doubling over the last decade.
FedEx Express had responded to global uncertainty, a slowdown of Asia exports and weakness inthe technology sector with yield improvements despite lower volumes and was adapting capacity todemand by taking older planes out of service, Smith said. FedEx is due to unveil a majorrestructuring of its US express business in October and already announced at the start of this weekthat it was offering voluntary buyouts (redundancies) to some US employees, although it did not sayhow many staff were affected.
In financial year 2013, FedEx Express expects to increase international revenues and yields butsee slightly lower US domestic revenues, resulting with “modest” improvements in operating profitand margin, according to the Annual Report.
Looking ahead, the veteran CEO declared: “Our long-term strategies are working, and we believewe will improve our competitive position and our financial performance over the next several years,as a result.” To achieve this, FedEx needed to take advantage of its scale to improve efficiency,remain “nimble and responsive” to customers, and stay “lean and flexible”, he stressed.
Smith admitted that growth in the U.S. and Europe is only “moderate” but stressed the “positivesigns worldwide because of the strength of emerging markets” as countries such as China, India,Mexico and Brazil quickly developed into consumption markets. “Despite the slowdown in Europe lastyear, our business there continues to grow. To better serve customers, FedEx Express is openingstations across Europe. We’ve also recently completed acquisitions of transportation companies inPoland, France, and Brazil to provide customers in those markets with better domestic service andimproved access to global markets,” he added.
Addressing demand patterns, Smith emphasised that: “Air express will continue to grow long termas the integration of the world’s economies generate more small shipments moving directly from thepoint of production to the end user.” But he also noted that air freight shipping is becoming moreepisodic. “High-value technology products make up a large portion of this market these days, andmore of these goods are being shipped as part of large new product launches.” This meant capacityneeded to be adjusted rapidly in response.
