FedEx yesterday reported its full financial year results and outlined expectations of ongoing supply chain disruption, a slow return of air bellyhold capacity and lower growth levels for the coming fiscal year.
In the fiscal year ending May 31, the express giant saw revenues increase by 11.3% year on year to $93.5bn and operating income increased by 6.6% to $3.8bn on the back of higher yields across its express, ground and freight businesses.
Looking ahead, the coming 12 months are expected to see freight demand reduce with volumes expected to grow by a low single digit.
“We anticipate consumers will keep spending and their spending will continue tilting towards services from goods,” said FedEx chief customer officer Brie Carere. “We expect more consumers to return to stores. With this backdrop, we do expect pressure on B2C volumes.”
She added that the latest Purchasing Managers Index showed a “sharp decline” and that inventory restocking is slowing after a build up last year and earlier this year.
“This will dampen freight demand,” she said.
Carere added that global trade growth has slowed as a result of lockdowns in China and the Ukraine war “limiting the flow of goods and reducing international export volumes”.
“We do anticipate supply chain disruption throughout the fiscal year,” she added.
On the return of belly capacity to the air cargo market, FedEx is expecting an eventual recovery but added that this will take some time, remaining constrained in fiscal year 2023.
As a result, pricing is expected remain favourable to FedEx although less so than previously.
“The Europe to Asia lane is estimated to recover in Q1 calendar year 24 and belly capacity on Transpacific Airlines is estimated to recover in Q3 calendar year 24. Commercial capacity between Europe and Asia is not expected to recover until Q1 of calendar year 2025,” Carere said.
“Our volume forecast has low single digit volume growth. We’ve also prepared plans to manage through slowing economic environment if required.
“We will take costs and revenue actions to mitigate impact of further economic softening, incorporating the lessons learned over the last two extraordinary years.”