FedEx Reports High First Quarter Earning

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FedEx Corp. yesterday reported increased revenue, operating income and net income for the first quarter fiscal year 2001, which ended August 31.

Revenue , for example, was $4.8 billion, up 11 percent from $4.3 billion the previous year; operating income was $311 million, up 10 percent from $284 million a year ago; and net income was $169 million, up 6 percent from last year's $159 million.

Alan B. Graf, Jr., FedEx's executive vice president and chief financial officer attributed the positive results to three positive trends: Increased volume growth in most areas of FedEx's business; improved revenue per package at FedEx Express; and, a continued focus on reducing costs and increasing workforce productivity while providing convenient customer solutions.

Revenue from FedEx International Priority shipments, in particular, continued to grow at the fastest pace, exceeding 20 percent for the third consecutive quarter. Part of the reason for this increase is a result of "further enhancements FedEx has made to its international network," Graf said. "These enhancements, which include improved connectivity between Europe and Asia, connection of the Scandinavian countries to the FedEx EuroOne network and two additional flights between the U.S. and our hub at Charles de Gaulle airport in Paris, France, significantly improve service to our customers without materially increasing costs."

On Sept. 13, FedEx also announced an agreement with Chronopost International, the parcels and logistics holding Company of the La Poste Group, designed to strengthen their respective services within Europe. The agreement, effective January 1, 2001, will give customers of Chronopost International access to the FedEx air network, while FedEx customers in several key markets will benefit from the European ground infrastructure of Chronopost.

The agreement replaces the previous contract of Chronopost International, which only covered France.

"The potential benefits of aligning the most extensive global express transportation network with one of Europe's most efficient and highly respected brands are enormous," said Robert W. Elliott, President of FedEx for Europe, the Middle East and Africa. "FedEx is experiencing strong momentum in our region, with excellent growth rates. This agreement will build on that momentum with potential new sources of volume and revenue."

In addition, Graf said "average daily volume growth rates for FedEx Express' U.S. domestic overnight box and U.S. domestic deferred services increased more than 4 percent each, while FedEx Ground's growth rate of over 6 percent was the best in over a year. In addition to the volume growth in these services, our yield strategy continues to be effective. Our total yield or revenue per package at FedEx Express increased a strong 6 percent."

Graf attributed these increases in part due to "our new bundling and branding strategies gaining traction."

Graf also said that this year, FedEx consolidated its sales force and gave them additional training to cross-sell express and ground services during the quarter, and this "customer-solutions approach was evident when FedEx Home Delivery and FedEx Express successfully delivered 250,000 Harry Potter books for on the first day of release with a 99.97 percent service level. "

FedEx, however, continues to wrestle with stubbornly high fuel prices.

"Fuel remains a concern, as higher fuel prices increased fuel expense by approximately $55 million compared to last year's first quarter," Graf said. "However, we believe that fuel surcharges and hedging activity will continue to mitigate fuel risk. Management continues to scrutinize the capital and expense needs of each operation, and we maintain our belief that fiscal 2001 will be a record year for sales, profit and cash flow."

But, said Ed Wolfe, a transportation analyst at Bear Stearns & Co., New York. said that an upside to the quarter was "driven by strong cost control and benefit from its fuel surcharge which led to better than expected operating margins."

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