What's going on?
FedEx reported worse-than-expected earnings late on Tuesday, even as the US shipping giant uses any means necessary to get your deliveries to you on time.
What does this mean?
You’d think the ecommerce-fueled demand for deliveries would’ve been good news for FedEx last quarter, and you’d be right – if it had been able to keep up. But the company just can’t find enough drivers to deliver all those yoga mats, despite paying some of them 25% more than it did last year and hiring outside transport services to help pick up the slack (tweet this).
All that extra effort sent FedEx’s costs up around $450 million and its profit down 10% compared to the same quarter last year. And since FedEx reckons those labor shortages will stick around for a while, the company doesn’t have high hopes going forward either: it lowered its profit forecast for the rest of 2021.
Why should I care?
The bigger picture: FedEx has the power.
It’s not all bad news for FedEx: that massive demand means it’s been able to up its prices without losing customers along the way. And the company’s taking full advantage of that newfound “pricing power”: it’s already announced it’ll be bumping up surcharges during the ever-lucrative festive season, and said on Monday it’d be hiking standard prices again in January.
Zooming out: The market’s only growing.
FedEx had better find some new drivers soon, with the company expecting the number of deliveries in the US parcel market to grow 10% a year until 2026. A lot of that uptick is thanks to the ecommerce boom, which FedEx reckons will see companies send out around 100 million packages a day by next year.