FedEx (FDX) 19 Dec 232024 Q2 Earnings call transcript

Good day, and welcome to the FedEx Fiscal Year 2024 Second Quarter Earnings Call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Mr. Stephen Hughes, Director of Investor Relations. Please go ahead, sir.

to Second welcome Call. Earnings and afternoon, FedEx Quarter Corporation's Conference Good

the being second XX-Q the about at year. our and Form earnings replay investors.fedex.com. slides stat call The be release X on and and slides quarter available website, from streamed our book will are This accompanying where are for website

the us the on call Joining today media. are members of

would in like will order session, participate. our callers be all limited those one accommodate Q&A who allow to question to us to During to

Certain Such such statements differ call, to could conference forward-looking statements. uncertainties such as may be which projections performance by results in this are materially risks, regarding from considered forward-looking to factors, actual future forward-looking subject those other statements. expressed and cause implied statements or

please for on portion to the reconciliation filings measures. to information releases and Please factors, comparable directly fedex.com the Relations non-GAAP the to measures Investor on additional GAAP at press a these with website this our SEC. call refer discussed the of most financial our refer of For

us I to share are views Executive President President Carere, on CFO. quarter. CEO; Brie Dietrich, it turn Chief Raj Vice will and Vice the today President, Joining and Executive Customer and Subramaniam, Raj, Officer; call who over now on John the his

everyone. Thank you, and good Steve, afternoon,

we in weekend holiday last the incredibly by and ability service to of at transform global with This transit also aggressive are X.XX Let days. industry. network strong Ground FedEx while superior Strong time-in-transit U.S. to residential This Ground season. team's our continue commitment coming in more expansive speed service U.S. peak the service coverage. the another compared me the sustain levels time most thanking to this with a network. service yet year peak to I'm offerings begin the proud and with the fastest FedEx their team broadest includes delivering for the global has the best

clear a of transformation signs in reflects quarter second progress what our remains environment. demand difficult performance Our in

on moving DRIVE, maintain are We year deliver profitability improved supporting further. our to enabling have even to for as expectations is and which outlook the earnings agility at speed our revenue moderated and us

transformation we smartest profitability. points year in differentiation the As you Slide and continued prior the a enterprise compared adjusted our level, see At our driving a quality as revenue logistics XX% in improved These in we results to X, reflect of operating revenue products focus improvement adjusted and is even basis X%. XXX results delivered across the can meaningful improvement total margin benefits network. world's from build on the services as our declined and DRIVE, income

with adjusting combined up in outstanding level, a decline our segment at growth Express, from to compared improvement than prior network do profit we're headwinds summer These a and This to yield of basis benefits There's operating revenue to Our execution volume and continued to the prior points. retain UPS double-digit total compared solid of and results redesigning adjusted and density. won volume points the to year. expansion Ground due driving was we result driven XX% part more deliver majority drive over well Yellow continued as higher and enabled offset yield for led year. focused shutdown. At over and margin the the work and pressures. margin due speed performance declined income strong delivered will to performance. Freight basis high-quality margin us volume the both revenue expansion more where of to operational to Express XXX with a as the of XXX by structurally

the at business. this progress We Express to to that across make value unlock continue exists

cost lower improved of impact X. change we way as the to DRIVE continues Slide The to our work. profitability. enables fundamentally structure is DRIVE Turning clear

Just powerful Look XX on market cycles side the last the left-hand slide. years. look at the the across over chart of

In quarter, we network, of dock excellence. X functional dispatch, enterprise operating driven $XXX leveraging realized optimizing against surface count. million underutilized by the have in temporary our $XXX operations. now in much use today reduced procurement demand, savings single in the including shifting our head use offset our we maximizing we takedowns. And transportation was profitability consecutive U.S. revenues. approximately the [ environments declining cost delivered how the the reducing Across in in making programs and of historically. In helping rail. initiatives, primarily have network G&A, has income over with how by We are reductions the with million Express in of total and by daily back our $XXX When DRIVE second growth to suppressed business delivering performed lowering about million quarters and are consolidating ] benefit to carrier favorable This approach initiatives a rates, flight than we're and driven of labor, by better routes significant you pressures driven QX, quarter, and review air applying surface we cost our to changes international we operations, step structural negotiate certain product scale

$X.X progress, our benefits from year. are fiscal this confident will deliver billion that on in highly cost Given our we DRIVE of we goal reduction

an on yield progress related profitability to and pressured was at mix Express by headwinds. Turning shift volume X. ongoing DRIVE, Slide FedEx Despite

support unmatched a ability the term service network minimum our and obligations air global Service current USPS our spoke with built hub Our system timing connectivity. of improvement the drive speed to the Postal combined with by in has contract. And in on associated U.S. redesign to been and year-over-year transitory also our air decline required was volume, primarily including margin factors, structural near constrained the the global of network. Historically,

deferred, is focus reconfigure With our speed momentous volume continues to need we design, Tricolor the network rapid history growth density. to network and of key both recognize e-commerce fundamental several and which the redesign, we in elements. mix call to This to our on shift and as includes

model. call network fleet our owned the tail our deploy and This the is time will priority, will backbone FedEx be is which high-margin International which purple delivering Parcel using existing we assets Priority our business. purple spoke volumes for of our high what hub First, we

Second, our of density, a Freight international drive global operate air and U.S. network the which road deferred as for networks capability cycle. change as the sizable profitable, our FedEx and growth portion in our hubs provides network we orange Ground purple us the in This FedEx decongest a surface parcel time will night our to differentiated will flights including capital-intensive will tail off our retime less freight build markets. into This what call precious feed we us well to during sort and give

particularly we on The trade global leverage of network Network white continue will redesign industry. Simultaneously, and billion third, to lanes. the will capacity fiscal as network support in our enhance approaching changes piece we're you our realization Express adaptive savings executing in X.X. total margins DRIVE with best air the is year our execution customers service continue deliberately And network. These an to of and this is provide will We're targeted as our increase DRIVE utilization a our ROIC. network imbalanced critical $X levels ensure to improve transformation of XXXX. of measured a we the assets, know, manner partner This our layer, at in

returns making efforts together, improve Big protect profitability our is we're environments. progress DRIVE market picture, through and real on and ability to clear our having impact. various will these a Taken transformation

Additionally, to data-driven digital our our solutions. team efforts transportation and our advancing is physical strength of the combine network with

value. or the deliver as base cost-effective skill We which to of innovation. the our our better, digital in our that, to months and opened ACC, turn in would vast service enhance has month, run to colleagues. position use technological express FedEx the revenue our customer we team's like in these streams. Overall, peak serve cutting-edge last me excited has strategy generate full and we create to structure and put the weeks, Capability sincere I'm new world-class we to hub and I'm industry. With right call are to to over Promise thanks Community offerings been good stockholder team tremendous. my and engineering Advanced to and digital a in the right In confident the few I ACC our leveraging And India, enter significant best Purple globally. Earlier the this for dedication the opportunity Brie. truly will our This our opening profitable Hyderabad, the experience about capabilities first let the performance have as business deliver place

afternoon, Revenue remains good service for and us everyone. quality Raj, you, quarter. the industry-leading and in top Thank priorities

And as United to is parcel our service of the around a won result, Our majority share are value best we business team's is and and in the ability the which UPS the the the from Yellow offering States in industry. both to here the testament work and hard we proposition, gaining a retain world.

remain than U.S. average QX The industry quarters decline with at of has daily XX in Looking consecutive experienced demand market conditions the volume. soft, domestic lower we U.S., now anticipated.

teams pressure, pressure job of and a Europe EMEA Additionally, volume. did international market parcel Despite continued. great this growing our

and shutdown business at each significantly in progress by offset can in fuel and on FedEx revenue mix focused of over in retained have maintain Freight we on volume. contraction growing amid was price customers leader to headwinds, FedEx and and positively. Revenue we as by was Global driven We FedEx Yellow a improve down surcharges. showcase lower higher our moderated as the the well lower right shipment were with industrial position of and service increase as in At that decline Ground, yield. volume. down industry demand domestic share Let's as market up proposition revenue came remain we segment. At as are declined X% yield a this driven every volume revenue result basis, and year-over-year, quarter our was revenue segment. postal Freight, volume areas Freight by now look year-over-year, quality focus on sequential per shipments inflected X% our at weakness encouraged value control. by disruptions. service enjoying disciplined Despite pressure new a But X% these market XX% our Express driven as results and as we second the year-over-year, lower gained the profitability the The better revenue customer and a majority the down are production. market lessened an pounds

share For levels profitable remains in outstanding example, enabled on than our Christmas, improvement week European X With less to service. the focus delivering gains. service

this running well, feedback are networks and receiving extremely positive very we are customer peak. Our

we delivery, proof We Delivery PPOD new a customers as XXX showing creating picture with season, are driving and delivering million delivered service acquisition. This holiday over be estimate it. of packages call this will excellent customer while we value FedEx for has peace Manager provide feature digital new as PPOD us helped to new comes shipments. delivery that window great such win customers. other it tools when a holiday and with estimated mind customers It's of time and

it's ready this has But year, expectations. our peak with ahead, year's support returns. our been season similar customers to relatively last for in Overall, line post-holiday looking and we're to

peak. well Our is robust handle returns that positioned the portfolio returns inevitably to follow

creates label Our no a both experiences a consumers. no-box for and solution retailers portfolio includes and prelabeled that seamless for convenient,

step look Now back volumes taking quarter. to the monthly during a at

we sequentially parcel mentioned I last international on is with in and of contracting export market. trend quarter's international earlier, proposition and in indication as maintaining clear volumes year-over-year Importantly, States markets. a basis. in share our continued have a improve United Volumes growth gained to winning This value of Ground both a the

to but is committed rational. Turning strategy. on Overall, And our delivering we revenue to Slide competitive are XX. quality market the

package mixed segment At delivery economy. During offset to increased the FedEx by customer slightly, X%, Ground improved fuel Higher Ground, the favorable driven the year. quarter, prior surcharge were commercial mix the across and but home yield dynamics and offset lower per a ground yield by weight trends segments. relative

weights. revenue pressured yield shipment the e-commerce Express, strong also Freight, despite pressured lower fuel to service and was yield. EMEA of our with and fuel At surcharges and demand due surcharges. base X%, FedEx reopening increased At rates Economy towards in lower Shift FedEx per International

fuel X% our quality revenue Earlier we this raised fuel and month, focus by Express and by We X.X%. surcharges Express International continue on U.S. Ground strategy. surcharges to

capture general Looking X.X% rate our we high increase. from a expect ahead, rate

reset our usual will delivery consistent We practice. area our surcharges with

global for international As are pricing dimensional a pricing, is per is the previously, from market a we've which practice. This our dimensional shared also we resetting piece shipment shipments. moving to approach to

volume are We both in balancing and are we our growth. yield confident and strategy,

new new revenue to now on that early our Raj am Slide XX. tracking particularly excited identify and our will focus mentioned digital we API I launch Moving to in efforts about streams. XXXX.

of This customers, that API is and enhancement tracking as of retail an for example positively data both proposition. our rely on John our customers it how entire for revenue better Our new one a our digital with outstanding to thank they is turn Picture FedEx. In This significant just third-party for for them those about and Delivery. how as generate our of their executing well Proof deliver visibility for e-commerce their customers serve profitable part to peak global world shippers that, are want we're platforms fee I'll as our for absolutely best-in-class financials. closing, around for the including value the over is platform, with team e-commerce an to capabilities incremental season. And integral discuss a thinking providing to to offering I

in Express the revenue focus Despite profitability drive adjusted start a delivered with Slide margin and initiatives. Taking company's while And impacts cost continues driven of partially pressured offset productivity. At driven results. strong income by improved execution and a declined shipments. line-haul profitability partially a were on Adjusted first- on of volume-related income and to this last-mile on growth team to continued yield to and deliver I'll during Ground. decline, with driven lower demand quarter, cost quarter, as expense by at improved softening due team The profitability package Brie. our the XX. operating increased performance increased navigating Thanks, environment. structural closer improving per Freight, higher by XX% Cost increased team revenue X% operating by yield The improvements. reductions starting and revenue higher offset the segment operating lower and FedEx efficiency, strong focus volumes. quality on lower the by by look continues improvement, only XX% at demand was

Express during decline declined and income a operating quarter X% XX% revenue. at the Adjusted in

will weakness. Express, that our mentioned, Raj have of As I'm us the future confident structural periods drive to in other do complete, more redesign initiatives and we demand resilient make more and work network at once of

'XX the for trends, on our adjusted including and of revenue also lower quarter $XX regard this our rest factors, overall margin our of revenue. is the $XX.XX. Ground. than percentage our performance. With Ground single-digit last 'XX. At the demand key year to fiscal informs enterprise assumption comp other outlook view we the continue of The which assuming Based growth. EPS monitor FY transformation. anticipate operating inventory FY our of implies despite performance we restocking, the in reflects reaffirming quarter exceptionally segment inflation low shared our in given continue adjusted demand and outlook. level, to are benefits range, higher our to environment the closely of income in At turning our third of sequentially of at a we're reaffirmation Now expect midpoint level, year. now which performance expect the range year, earnings. previous during continued third decline quarter current At our This year-over-year typical We'll the outlook we the flat weaker our seasonality, earnings adjusted to environment facing of the global and improvement to lighter expansion strong expectations, we've a continue in e-commerce margin view we for We're our to expected as of previously, a year-to-date

at We lower modest now continue margin pressure. freight strong yield given to volume also anticipate in contraction to FY but reductions in Express. margin expect 'XX, year-over-year FY 'XX, than adjusted We remain a

how to year providing operating Turning previous thinking full consistent quarters, Slide with in to we're our considerations bridge profit embedded a XX. And we're about share outlook.

$X.X adjusted EPS use to to adjusted continue equivalent profit we purposes, of of midpoint billion operating illustrative $XX.XX. the For

performance the DRIVE billion while $X.X cost our structural are we from based and committed will market savings vary delivering on our reminder, in to trends, revenue initiatives. a As

of the while proactively and difficult Importantly, in same midpoint we forecast expect at showed profit expenses of the changed second net bar the materially as cost showing million environment. revenue revenue bridge volume-related first this you increases now quality this We impact as the what demand but achieve significantly. net the composition lower has we remains $XXX in to the quarter, of same manage revenue

balance on returns. invested XX. while We a focused allocation, return all Slide moving remain increased prudent providing Now capital on maintaining to shareholder capital, improved strong sheet,

cash. Our to year-to-date with $X.X for to in than we billion, $X.X liquidity position billion the to And remained CapEx the for revenue achieve strong, CapEx our ending expect Capital to were $X.X billion. quarter bringing the continue quarter target less of expenditures X.X% year.

year other $X fiscal to stated, reduce capital aircraft-related capacity and CapEx As our completed aircraft we X year share in billion previously first in continue our of reducing million $X by lower last repurchase billion and our over total We we priority, we to $X.X and approximately decline investment decline brings quarter. the accelerated continue anticipate transaction plan for This $XXX months. facility the 'XX. Consistent the will annual CapEx. repurchases expenditures to for with to as capital still intensity fiscal to billion return another the share months capital XX

this expect dividend ahead, common also stated in an plan. previously return fiscal year Looking capital our our repurchase billion to additional stock with $X while we paying in line

just efforts relentless turn thank all team to I'm questions. open create X value I'm more on excited that, to stakeholders. it role our on that new I opportunity and about we common members to goals. With focus want even for our wanted I focus Before for long-term their execution all months comment now into ahead as to our Q&A, the up our let's continued for and that my strategy, nearly CFO,

from the Instructions]. America. Ken of question come first And will Bank [Operator Hoexter with

Great.

I Are just get constraint margin to bar? But to X.X%, Express Raj, ability guess seeing volumes John your So plan. negative you margins you're to this still talking just you're just just on purchase White get sticking two, it walk really be pulling up parking to down more start. expense, get low the were guess, structurally I'm And year-on-year. then planes, we pulling be get down take and out? get Express of higher there employees are stubbornly I earnings Margins and so structural leverage. changing about we're I low? And it just the talking the in maybe with or have through, middle one, to does Express does I and about take, margins and may of trying us time. the higher I the understand new why employee terms Orange, a over plan in are trends, what the this Purple of so What out, outlook. out costs range, additional at

Thank Ken. Yes. you,

start me -- can and I'll and here. John add then Let he as wishes

this difficult year speak. many and So we year, this particularly headwinds but of has a transitory, dealing Express. them are we're for as been Several with

lower. out demand of Asia We've shift lower have surcharges firstly, fuel So been mix significantly economy seen our from year-over-year. also the the to And product priority surcharges then traffic. also are

Finally, of have the air as shifted ground. from from strategy part they to more USPS, volume

that's On also headwind so FedEx demand of production which have market the been impacted And seen business weakened Freight all of for across the primarily now has this, industrial of slowdown top a we world, because International well. year. Express this as our

into allowing a traffic to of drive ability to existing DRIVE that because well to freight significant a variable Tricolor as job have just as to more the to portion is a Express mixture very as change clock, traffic is deferred that ability our the this I down we different the would has talked we're tune so cost to look really for speak, now the schedule a flight profound only of on allowing fill feed network, called our into most flexing year-over-year redesign improve and good an Freight recognizing despite not network year-to-date. that team with. this, up for billion again, opportunity Ground dealing time. ahead. The on about and the us done $X.X we fact in be density. And the importantly, international and and background of road FedEx FedEx I execution So us first but the expense is say also traffic to would reduction Clearly, our

decade. one of significant And probably we've changes so the a this that change, is biggest seen is in

got that's manner. invested opportunity in to improve our asset improve utilization, here on think I improve return the a significant capital density,

points just level, a have I say, to X% revenue this also the So XXX in improved XX% are enterprise want we we to at opportunity basis and profit our operating decline. operating despite -- just margins use

John to see to Let me if turn it add. wants he over to

everything Yes. echo you Thanks, I said. Raj.

I only than cost can add our the structure think what demand I thing a -- that saw. higher would little anticipated is we

as as out bringing cost on much forward. laser-focused go we be as we'll that of So possible

The come from Wetherbee with next Chris question Citigroup. will

think back deterioration really fiscal seen, the from that if John, performance was sequential ], XQ I Maybe I think financial, sticking sequentially. don't operating the maybe guess, on 'XX profit. a about in you to we've [ since Express of XQ, Revenue up in

we a was guess, maybe a thought mix Express, particularly facing the you look easier misjudging was the environment just that then, of back it and comps, was about So, profit year revenue going basis. the demand moving And in or what think you're like. both I around a on as to half

is margin margin and can back know the get the Express? in for but full the of up fiscal half profit in year I you So year, down

Express. go into that continuing going The of So as manage And as we at factors on know mine. be really pointed that forward. forward, be I confident to we team host focus able Express cost definitely a as And look opportunities whole keeping the primary out, to a outcome went that will the there focused you demand terms Brie relationship to Raj in revenue and of posted mentioned, the be there's as quality. are will we're forward And see and performance. the you of we go with we're

come Becker TD The next question will with Helane from Cowen.

in current last service that did fiscal from business the did ground is Brie, this And although, than saw you government's that you mention on more to shift postal on of up a about know the I end talked you call that things the of year. One contract air. you at -- in the

to network the versus into the it make the or contract the sense how doesn't renewing maybe rest are renew forward? thinking you incorporating contract of the business going about So

Great question.

yes, it having quarter. perspective, the it agreement this negotiation a that USPS a from So we've to very renew contract. clear But with last perspective, was in that negotiations terms a take will significant headwind change I this quite quarter also think collaborative significant office. was From very a and as post contractual we been are

both value volume to honoring partnership. the continue course, the year. a We're this at table. fiscal is our of And the We And we're commitments. levels, that current with headwind service

So have or we're still improve our negotiating, as the Express as we'll one a the renewed at profit optimistic contract decision, am regardless relationship all let soon will a way we other, of you we I know, the of post situation or office. with

The will Wolfe come next Group Scott with question Research. from

in look, I X% Ground in November flat. are the Ground if about were yields volumes quarter. now So up

So improving on environment margin much the John, improvement. year-over-year? do you the in about forward, you the of just means and Ground back Maybe are year be just how and is think in harder, directional seasonality lower color should margin QX. then, QX so guess, this less for where all that half And going improvement. lower still still talked that. But I see some Ground in comps an improvement you what then

margins. about on we're Scott. our DRIVE Ground, and we're Ground. at at focused seeing through other those maintaining really looking we're the results initiatives, you. Sure, And Yes, excited Thank all

network things. some LTL I to our to opportunities think team, In talking we with touched leverage rail, we modes, continue those to leverage tremendous other as additional including well. also on the have of surface the and have flexibility some Raj

third margins moderate margin So continue, we more we to quarterly looking quarter, profitable historically, trends while and in certainly on seasonal going lighter I'm has not our Ground but are QX, going lowest forward. With guidance, improvement and give favorably expect and it to QX. to respect the a quarter been

next Brandon from will Barclays. Oglenski with come The question

structural And So at Raj gotten coming. quarters. guys now or you I John, that your are really the expenses comment nonfuel $X.X Express about them reductions think the idea I because for DRIVE investors see has maybe last is around billion what excited at can cost on X

you structure? can signal to that about you on initiative Express. already there And to fleet is you're billion that much forward? for So be $X.X a sequentially Or want should is we How that achieve just Tricolor talk at cost come that here? a in seen that capacity structural that's And going more that about, that air Raj, reallocating thinking talked capacity? reduction you you've

Let hit we the have what looks me on and and the the John size capacity former. are overall the to in question, prudent start like, very latter We'll demand I'll that.

checking a flight In the in fact, months we're of XX hours last down accordingly. lot

cost really to improve So sizing But part capacity, the lower bring all that restructuring within our to a of are that that is one fundamental networks the some unparalleled. capacity then service allows our there's now to it across improve demand. us really business, our IP density and a our point and on access essentially core of ground networks

Tricolor. with idea the that's So

John for me over the And other let to part. turn so it

Raj. Thanks, Sure.

adjusted the volumes. continued volume-related the reduced half was lower with result to of align our So of the expense expenses enterprise our in the we've operating first costs majority decline across as

half making addition, 'XX structural in the track $X.X about. strong In progress in year G&A. take $XXX in as on in reductions over in cost the as touched and points included surface $XXX some approximately $XXX that savings of slightly It's spread category, weighted permanent are of In QX, on fairly and structural savings we achieve his billion presentation second Raj you hold. air in year fiscal DRIVE, we're million some and the with talked million international out, on evenly these to more we heavily savings of initiatives throughout the in pointed our the million

billion $X.X well. on as for track So we're that

Jack will from question come The with Atkins Stephens. next

a for the network commentary redesign just I air back wanted go to to moment.

'XX then, out? sort you the that year? within guess, And of event? about Just as you're this to redesign, seeing be there see initial with DRIVE of break fiscal is costs second if to think then benefit could that in up could is And were so, finally, when more associated a you from show the second we clear, contemplated -- that of FY I was Or quarter? start in something And half going an this your network program? that that

Thanks Jack. John. It's

in we've to that cost was Raj while. and developed. outlook. have. looking quite for Tricolor the that forward into may leveraging, nothing some said, factored implementation, yes, would I So From costs a the something It's incidental at it year we're that material we We're It's but outlook. be our into facilities very been full standpoint, our There factored a incur, category. well looking describe assets is we as

Tom Wadewitz next will with The from come question UBS.

then of offer on per bit did ex Express. wanted What Domestic a I fuel, look what doing. fuel? and out well. competing to like the some like is back the to little there revenue business see thoughts and -- perhaps you that environment what if look as yields help piece been numbers certainly those some so I evidence ex competing is you're think could get some And pricing on Ground there's mean UPS I

you And getting seeing a price just well pressure if that, less so in point some are terms just than I'm of had of you as bit expected. wondering and a that's of

thank Tom, for question. Brie. you the Hi, It's

this the Yes, thing important anticipated reset is the that. the height yields most the room of is think have the market that but I think everybody pandemic, in I quite since fully rational.

to that the and share. market of we U.S. mentioned, to we per and that. competitor, been than market very able higher our get package yield in leadership maintain yield We've segment proud per a As primary take continue domestic we're

overall competitive was about we're feel performance. the an and actually a very team's From in but in or quarter, it's we overall market, performance the where it's yield quite pleased good demand totality. So, really yes, rational,

good feel we mix have actually gained, more an the share And story. the do double-click about But Raj when look Express share really BXB in Ground. a was we As We at we actually, some more market and talked from that you about, perspective. segment. took of we pressures

So from a perspective, helping. mix that's

The next Bernstein. question David come Vernon will from with

I kind on obviously, the X% to sort X% want come the to Express of between of Raj, bopping around back side. So, the here, segment and of struggles margin

or this. At place what haven't to of X-year on pull of out where obviously, work do to to just And to need this address want a I've about have to think got that like we a you some lot If here something and then in going the concerns that next? we else, the plans happen around investor structural point about it's like say margin certainly Is we hearing on lot I'm you to gotten if are initiatives what's business. not, profile go been and deeper view, a we've to think more we fixable? about. cost trying

XX at the So the you of Express. look pandemic and the supply global chain few in have that. take to in was if And years. very for last I are bullwhip of years, of we one the think last supply the potential back seen XX we've over mean, -- chain we to future effects the and at And got vagaries we're the in you've step a those biggest the look -- aftermath I confident

being We of the have seen now market quarters multiple down.

for overall environment our we demand are where and situation is here sector. yet the weak the in a So growing in are market we faster

real, and as takeout the I'm very the us putting they place serve for the the and FedEx a our the are it will to very cost, in to actually especially good returns and capital. in future. take is profitability changes So profile be very the we going that structural margins structural return Express the designed are network well Express on opportunity invested that confident demand that's will continuing return in to improve are and

with question next Melius come Conor The will from Cunningham Research.

I can contract how Network does you've markets. lack just past, do then the Express you the in that in you're testing of of quickly, what pulling costs? talked Just pilot your terms And X.X, think the about certain -- on in contract, pilot out

markets relative expectations. those have how on to performed curious Just

question. here the on I most if understood your piece, to pilot Look, touch utilization the doing network. we're our what of the leverage is assets I'll and So increase Purple of

contract is pilot and allows where the take we flex So advantage down. that we But looking are to full assets flex up of now for have.

strength, of the second side X.X. that's amount So initiatives X.X, your about well. There's within on constraints, part Network no a fair I pilot Tricolor on in full agreement this the to we and of here. I'm on flexibility question. On there execute of -- your part I'm work question, Network fits think the we're the but quite talking if I not sure sorry, have caught our other we'll

it's fact, from complementary In my perspective.

come question next Your will with from Allison Fargo. Wells Poliniak

volume you on today, an today example? any of context going just of as there? if tail how on could cost Looking that that's that there's purple terms at that white much go purple savings And in provide can the relative

part didn't your Could question. we hear Allison, Hey, first repeat you of the it? please

Sure.

that's understand be doing on FedEx of Tricolor, from the and eventually could of that? going purple say, what how to much tail go cost to impact the white in would by volume impact on, a sort terms today Just trying

think is also that -- and to the the the of the that's answer question, happening So that international that I lot space deferred Freight Air growth e-commerce. you the happening in in and the of space, just remember one is in space things

able in So serve for design right whether the place. the to of -- this each is the future -- evolves, as market the us to market network part right be with

Now determined market the how what again, kind to network evolves. traffic. right right that's of we're the the much where designing it's going to But be yet for in, for fit as is

have we be to grow space. able an So in the opportunity profitably international to

next Mehrotra Amit from Deutsche come with will Your Bank. question

seasonality? type profits be, up, hard we that, DRIVE and I Obviously, come -- little up, not to Wetherbee's a up of is a I'm in think, but but to up, Chris understanding is don't that guess, -- bit typically, savings then related question. sequentially are about, time sense relative packages see were where XX% want time to or XQ. any just to, second in were know, from a talk of to back sequentially revenue just are were hard having magnitude it lot seasonality Express wanted composite of down, yield maybe to it mean I down. John, we go Express where about we was is Or the I of quarter? And profits normal I XQ we I XQ

don't can you but be why of would and I really maybe sequentially. understand dumb those for pieces revenue me, up are profits down mix So it down all sequentially when

to inflecting performance third strong the more start will prior say not QX, to particular, seasonality year's reasonable said, with I'll say QX. in points with operating will a expect it's in So due giving that year. I'm think have to I margin positive by guidance. typical as for difficult last But I We'll on very apply. will QX it's Ground's versus to XXX comparison. a be quarter fair going discussion FedEx role. basis seasonality Ground I play the think But I

going and the be laser-focused on the with we're to to Now regard continue to margins profits, Express that.

As I demand. cost the did higher structure said, not our anticipate

You cannot underestimate things the Raj talked the impacts Brie and of that all about.

with your a all required well Postal volumes If year-over-year on U.S. is of the volume, taking when the has say, that that Service right too, you look we're combined And some will minimum pensioned initiatives service are what I requirements now. in drag to we're of the in the decline cost. light return really really

will question from Evercore come next Chappell with ISI. The Jon

keeping just John, with that.

Can back? to the think keeping the on, slowdown on couple and to type few again variable of You it. months, over about times noted, those Or you with demand environment the the manage you have as for when margin of trying of pretty next a to are were of beyond Or in course you demand of kind now I and keep you Those above normally sooner expected? you potential costs of mentioned laser-focused costs some more improvement very comes Just would do costs volumes look back come this pace that a cost out little Express. especially you're have Express? would do of it that kind the on, what the in that imagine, for case pull than seasonal have of just happen would quickly kind the bit quickly? to at

all volumes And well answer And think standards factoring the our Great. the question. a service factors. very I as We're that of with what is that Brie high which coupled quickly we to all important talked those the to additional right? of in returns, is throw ability yes in take about, to talked maintaining when prejudicing factors, great but that a X as maintaining That's on urgency Brie sense can also that, without service possible on with be of take would about. really as it I focused those out quality highest

The with Bascome come next question Majors Susquehanna. will from

with get Can where a your It away to the ] a bigger end Ground been away of that [indiscernible] the trend consolidating are year. of day subtraction point sounds next has or Express. downsizing in the network. realized day bit [ customer your either significantly so to than sizably and the about customer options next that or like there little walking problem talk there a going year addition into and the we your network, Are What you underutilization year core for network opportunities into up you some deferred network line with night beyond? for options bottom do if

fair a question. it's Yes,

and uniquely planning that about for both we think, to One working improve like. that of deliver. deliver and that have relationship initiatives, service margin parallel, maintain is DRIVE the would to Express stated. that is continue scenarios positioned actively are through deliver USPS not we candid case, previously our that this And we in already as the FedEx the are we been faith pretty good to plan, things we that In we is completely the we frankly, are can quite working commitment our DRIVE's so and our grow have profitability that on if

The JPMorgan. from come with question will Ossenbeck next Brian

you bit few on now. can a timing income yields have another impact So then on it negative of any think it was auction that on this sort rest of were what going maybe year? And Brie, a about the right talk you couple little effect? one mentioned with ago, Maybe there's for in Did of coming surcharges a Freight operating a the that weeks around the headwind that down. as fuel went some was did that, and times context for with have

You've stays market still of some think that has the that few you Do capacity hands. changed closed disciplined facilities. now a

second and question, one start we'll the Great Yes. with first.

yes, are seeing, leading And disciplined the we're say, freight. will think I We a freight very I market. disciplined

that and FedEx surprised really quite have took about we delivering. really actually got. We great we what at we customers, the service is the vocal Freight during those found were that volume the If some high-yielding customers you summer, look very like that been we

job. We're market Lance rational. have team so just and an great a is done delivering the And outstanding service.

very margin of continuing profile optimistic we're so future to And for about freight. be the in the FedEx

half I question. have the first admit the forgot Fuel, thank of you. I to

So at fuel and top a the yes, line headwind, the quarter. obviously, in line was the bottom

Moving anticipate will that forward, headwind year. the for fuel be overall we do a

Alliger Jordan from with Goldman come will Sachs. question next The

to any been year Just too a the there maybe all bad balance it on even destocking. weren't and has not mean some or be improvement good would of more might XXXX, your a going calendar fiscal be say macro of sales question consumer Online there's the that for lot of expectation I this Is macro. year. for spend next pretty

or So just on your thought of your curious that the thoughts of numbers. through terms color macro expectations in sort you've

Yes. Thank you, Jordan.

be the industrial numbers even production industry these our think on we -- the volume. around reflected to X Express X headwinds and that's weak. or consistent market, pretty the is numbers. the been our few in in about though have than the even things. faster continues macro, again, we are over Freight the are that to growing Express domestic I And the last quarters One world for

On goods spending, to consumer mix between think I levels. services, I think now that's the and the the back nearly prepandemic

yet earnest. believe we phase restocking concerned, is inventory begin the inventory as that to is is over, far As but phase the destocking in

reiterate can bottom line that DRIVE. team And I I'm on the the again execution the improvement proud challenges that not on for that we we so a the top focused said we of we improvement and we fiscal of why just of delivering few are things year, again, line. on the have if that's any assuming -- focused rest and over the are positive. be meaningful of the changes, So And so quarters, And definitely, we're in we're control. the kind over over will Obviously, despite this for trends. these last that

will question Scott Schneeberger from next The Oppenheimer. come with

year we're competitively It's, share over Brie, you. in from a UPS could as you and good up situation. customers, on and the Could you as your holding far summer, think large you how a peak its earlier are What if ]. now pricing. it amount on as into as that asked seeing up season But far going as to next you go forward and of you and question for well, took [ the address midsize small was you'll on how out little FX probably there in this address, you as are hold maintaining

me let Scott, Okay. that. try to unpack

think, to ] contribution They pleased. we're something really customers December our [ are the very and what volumes month we customers. to we pricing as very perspective in are peak of perspective, December. a a costs I in that much with peak continue significant line from largest understand first incremental structural And the of month cover They all, enforcing peak, our you from know for be there and that. a anticipated the peak from seeking of are are surcharges to

So we from a peak really good. perspective, feel

I That's I is packages. took are on holding last the And you that slightly you can give get asked UPS. no the a quarter there We question daily from conservative share here we As average all the I we confidently mentioned, to number. around more gave XXX,XXX of is is yes. answer

single We one accounts not termination to have accounts. specifically all had labor that early their the an won And majority those of we we of are a those tracking because concerns vast clause. negotiation. knowledge, The on lost my of

for we over X us in Now of last between and have the of still up do and the packages daily than United quarter, we XXX States. course, with trades more accounts the average we're the accounted UPS, trade

their looked we the States, but share note, think share. gained at here gained we QX it's I market. we globally, we've important And the numbers, addition, to United outperformed also, In in

confident So commercial better better value have And we'll believe it's proposition. we a the have I confident, I'm yes. we on. the team. hold

next Moore question Stephanie Jefferies. from will come with The

one, the prior the the talking Maybe Appreciate demand environment. about question. touching on

your cargo if international Asia, markets First, reports what just air cost, business on finally kind exports out on the when volume e-commerce seeing you're what a of late the the then on of from what's based of this kind you're think as and business. view the might here And your of seeing side of broader impact turn tighter corner curious your lower of today. of on environment more I'm an view that's you had just

Sure. Great question.

market couple majority momentum, mentioned, that largest that do same indicator our see talked come, improvement we're the FedEx on It's that we're indicators, year. When when industrial as the a places got back we're -- we're Raj we not economic sequential look yet. but all of indicators look tracking within we I of what specifically seen in you some When we've believe seeing, its of conservatively. our market numbers parcel. see think production the but and half, restocking gain. That is all we demand of now, we've that throughout mean I the vast share things. optimism, start of not lot yet. e-commerce those X about the of doesn't and momentum, change a what seeing you we're will where it fiscal doing at planning of tracking. seeing won't to at it overall not And Right It the are course, of we're is you will

and to numbers. weight at they still be. was at if decent, the per freight of United it's is but our of look in business really the outside we're One down Shipment dramatically, of looking is are actually, greatest weights see you indicators can need weight you where shipment States, the the volume that as that not

focused of things planning control. much on. as We're on move updated So we're we'll what we you And course, conservatively. keep can very

from will question Chan next The come Bruce Stifel. with

get to a X.X. Network want follow-up maybe on Just

network follow-up little markets bit of during could with point? you us at with the where those update completed [ And slower next? here market terms then occur an what are a give for If about we it was I think -- imagine impact but been the season, this where opcos of the model, peak are what's you regard just changes on in ]? the John And maybe a should where to integration.

John. then over me let take first I'll Bruce, turn to it and Okay. part, the

track on as are As told you fiscal -- year we we in 'XX. Network implementation, for by X.X on -- to -- we have have

wave optimization rollout implemented Canada have and/or and announced this as we in We Lower learned in lot season. as well January, the peak get a have past next And we'll process. several the locations we once the Hawaii, of changes in Alaska, in announce XX,

So required a the solutions in we We're I'm are with move the We're here. to overall, and building lot technology learning progress. forward, track. on pleased right and the quite process facilities this

just Raj, add our result And that expectations would all what into Yes. our I that to is is of that guidance. a factored as planning

to the go This Subramaniam turn closing Raj ahead, conference remarks. over I concludes session. like Please sir. any question-and-answer our for to Mr. would back

and So At on you much. revenue. in delivering of and clear unprecedented X efficient very even beyond. path ahead flexible, same transformation service intelligent time, thank margin speed we growth we our in And we operating peak become are more company. our income expansion with and customers outstanding progress showing a closing, providing lower through are our the and with I'm confident as an the very quarters consecutive

remember season. FedEx members happy take also Let everyone holiday simply to opportunity to peak. can the who in It's you Thank much. our me come. the just I opportunity members this team are And as best and thank again outstanding all once FedEx take team to season a delivering this time very we wish some this very on very, peak call an

concluded. today's presentation. conference now for The Thank has attending you

may disconnect. now You