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LOS ANGELES (Reuters) – U.S. delivery firm FedEx Corp (NYSE:FDX) reinstated its original fiscal 2022 forecast on Thursday, even as persistent labor woes chipped away profits ahead of the peak holiday season when the number of packages it handles often doubles.
Shares in the company, which also reported flat year-over-year adjusted profit for the fiscal second quarter, jumped 6.2% to $253.41 in after-hours trading.
Concerns have eased that this year’s festive season could see a repeat of 2020’s “Shipageddon” pandemic delivery delays. Retailers have reduced the pressure on carriers like FedEx and United Parcel Service (NYSE:UPS) by urging early shopping and expanding pick-up and gig-delivery options. At the same time, most stores remain open despite accelerating numbers of Omicron variant infections.
Memphis, Tennessee-based FedEx now expects full-year earnings, excluding items, of $20.50 to $21.50 per share, as it had first forecast. In September, FedEx lowered that range to $19.75 to $21.00 per share.
Adjusted net income was $1.3 billion, or $4.83 per share, for the quarter ended Nov. 30, unchanged from the year earlier.
Labor shortages disrupted normal work flows, resulting in network inefficiencies, higher purchased transportation costs, and higher wage rates. Those factors increased costs by an estimated $470 million year over year, primarily at FedEx Ground. In the prior quarter, FedEx put those costs at $450 million.
In the latest quarter, the company also paid “significantly” higher taxes, but benefited from lower fuel prices.
Revenue increased 14% to $23.5 billion, fueled by elevated demand for e-commerce home deliveries, including some holiday gifts.
Experts and some customers said FedEx is lagging UPS and the U.S. Postal Service in terms of on-time deliveries, however.
“FedEx delivery times are really lagging and I believe it’s due to their staffing issue,” said Cathy Morrow Roberson, president of consultancy Logistics Trends & Insights.
From Nov. 14 to Dec. 4 – which included the Thanksgiving and Cyber Monday holiday shopping days – on-time performance was 85.7% for FedEx, 96.4% at UPS, and 95.1% for the U.S. Postal Service, according to delivery invoice auditor ShipMatrix.
Results for the week of Dec. 5 so far appear to be mostly in line with prior weeks, ShipMatrix founder Satish Jindel said.
FedEx’s Ground deadline for Christmas delivery was Wednesday, Dec. 15.
