US less-than-trailer load market drop bites into FedEx profits

FEDEX first quarter net profit was up four per cent, but the operating margin fell 0.4 per cent to 8.8 per cent because of a drop in the US less-than-trailer-load (LTL) market.

FedEx's revenue rose eight per cent year-on-year to US$9.20 billion. The express division did better, driven by global business, which grew six per cent while US traffic fell one per cent.

FedEx Express as a whole had a revenue of $5.89 billion in the quarter, up four per cent year-on-year while margins and income both strengthened.

The FedEx overland business did well fuelled by its home delivery and commercial services, with revenue increasing by 14 per cent and operating income growing by 19 per cent to $190 million. Margins have hit 11.7 per cent.

The big problem area of this quarter was said to have been the LTL business in FedEx freight. Revenue was strong over the quarter, reporting an increase of 22 per cent, but operating income plummeted by 30 per cent, with the operating margin almost halving to 8.5 per cent down from 14.8 per cent.

FedEx CEO Fred Smith blamed the weaker performance to a "sluggish US economy" and is looking to international markets to fuel growth.