FedEx Consolidates Express and Other Units Under CEO Subramaniam, To Save $4B In Costs, Boosts FY24 Dividend By 10%

On Wednesday, FedEx Corp FDX elaborated on its plan to slash $4 billion in permanent costs by the end of FY25 at the DRIVE Investor Event.

The company proposes to bring FedEx Express, FedEx Ground, FedEx Services, and other FedEx operating companies into Federal Express Corporation, becoming a single company operating a unified, fully integrated air-ground network under the respected FedEx brand by June 2024. 

FedEx Freight will continue to provide less-than-truckload freight transportation services as a stand-alone company under Federal Express Corporation.

FedEx CEO Raj Subramaniam will serve as President and CEO of the combined organization.

This new structure will help facilitate the company's DRIVE transformation, including Network 2.0, the multi-year effort to improve the efficiency with which FedEx picks up, transports, and delivers packages in the U.S. and Canada. 

To aid in this smooth transition, effective April 16, 2023, John A. Smith will become President and CEO of U.S. and Canada Ground Operations at FedEx Express and assume leadership of surface operations across the FedEx Express, FedEx Ground, and FedEx Freight businesses. 

Richard W. Smith will serve as President and CEO of Airline and International at FedEx Express, overseeing all other regions and FedEx Logistics.

The DRIVE transformation spans 14 domains across Customer, Surface Network, Air Network & International, and General and Administrative (G&A). 

FedEx expects DRIVE to generate $4.0 billion of permanent cost reductions in fiscal 2025.

Each area will likely generate savings in FY25, including $1.2 billion in Surface Network, $1.3 billion in Air Network & International, and $1.5 billion in General & Administrative.

DRIVE is also enabling the implementation of Network 2.0, likely to generate an incremental $2 billion of savings in FY27.

FedEx continues to project costs of up to $2 billion by the end of FY25 to implement its business optimization initiatives, including the DRIVE and Network 2.0 programs.

Dividend: FedEx's board approved an increase in the annual dividend rate on its common stock of 10%, or $0.44 per share, to $5.04 per share for FY24.

Executive Compensation: FedEx's cash-based long-term incentive (LTI) plan for FY24 through FY26 will include a Return on Invested Capital (ROIC) performance metric that will replace the capital expenditures as a percentage of revenue performance metric used in recent LTI plans.

Price Action: FDX shares traded higher by 3.32% at $234.00 premarket on the last check Wednesday.

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