FedEx Cost Reductions Pay off by Gearing Away from Express Shipping

  • Scott Blickensderfer
  • June 20, 2014
  • 0

FedEx Corp. finishes the fiscal year strong with profits earned from an initiative to cut spending set forth in October 2012.

FedEx stock rose 6.2 percent to reach an all-time high of $148.95 on the New York Stock Exchange. FedEx’s reductions provided a strong fourth fiscal quarterly profit of $2.46 a share, which comes as a relief for investors after FedEx reported a profit of only $1.23 in the quarters end back in February 2014, short of estimate by 16 percent. The shortcomings were the result of weather-related issues for the delivery company.

After weathering the storm, FedEx boasts a 3.6 percent increase this year to date.

FedEx instituted a $1.7 billion cost-reduction initiative that revolved around swaying customers to choose slower shipping options instead of FedEX Express shipping. Slower forms of delivery are more cost-efficient and allow the company to switch to newer, more fuel-efficient vehicles. They have decommissioned 5,000 older, less fuel-efficient vehicles.

FedEx plans to base their price of shipping off of the size of the package in addition to its weight.

FedEx has also reduced their employee headcount by 3,600, not through downsizing or dismissals, but by offering a voluntary buyout option. FedEx has said most of the benefits would be achieved by fiscal 2015.

FedEx forecasts 2015 earnings to be between $8.50 and $9 per share.

 

 

 

 

 

 

Photo: Wikimedia 

 

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Scott Blickensderfer is the office's token Midwesterner. When he isn't writing business interest articles or editing up a storm, he can be seen quietly eating crackers at his desk. He probably knows a lot about corn.