FedEx Pricing Spine-ometer: 3 of 5 Vertebrae

FedEx announced a 6.9% price increase for January 2023.?Why?

For the quarter ending August 31 compared to same period last year, packages handled fell 11%, the third straight quarter of declines.?Increases in rates and fees like fuel surcharges improved revenue.?Overall, however, volume declines and cost increases weighed heavier than price increases on earnings and profits declined.?

(A profit bridge would show this.?See Measuring the Impact of Pricing Initiatives | Wiglaf Journal)

While most analysts in their earning call focused on operational costs, we focus on pricing decisions. The FedEx price increase announcement is good but question if the size is too small.?

FedEx price increase announcements for the coming year are generally made this time of the year and matched by UPS, their major competitor soon afterwards.?I applaud FedEx for informing customers and investors regarding expected changes to the terms of engagement.?On the calendar, UPS’s earnings call fall one month later and hence we anticipate a parallel announcement to come.

But is the price increase of 6.9% the right size??This is a large price increase for FedEx but is much lower that the recent headline inflation rate.?Loss of logistics to Amazon challenges price increases but a new competitor does not always necessitate lower prices. Last year, FedEx announced a 4.9% price increase around this time only to raise prices further to around 5.9%.?This time we may see a repeat.

On the clarity of FedEx’s announcement I give kudos but the size of the price increase was reported without any clear reasoning.

FedEx Pricing Spine:?3 out of 5 vertebrae on their recent decisions.??????????????????????????????????????????????????????????

FDX (FedEx Corp.) fluctuated but held relatively steady in the days following the news around 155.?2022 revenue of $93 billion with a 3.8 % margin and P/E ratio near 11.

Call to action: Contact Wiglaf Pricing for your, private, pricing spine-ometer and discover where your pricing practices are strong and where they can be improved.

Fung, Esther (2022, September 23). FedEx to Raise Shipping Rates. Wall Street Journal, B1.