Investors punish FedEx as it struggles to adapt to the rise of e-commerce
Source: https://www.barrons.com/articles/fedex-economy-delivery-trade-amazon-germany-industrial-sector-tnt-express-51569350455
Not only has FedEx’s international shipping volumes been hit with the same trade tensions that have impacted other US companies, but the continued rise in e-commerce has affected the company’s profits. The delivery company is struggling to adapt to the rise in e-commerce and additional costs to build out its ground network, which is more expensive to run and less profitable than its niche business-to-business delivery model.
FedEx is down over 5% this year, with UPS (its biggest rival) up more than 20%. This can be explained by UPS’s colossal investment in managing the influx of e-commerce parcels; recognising FedEx’s struggles and taking advantage of them has helped them to stabilise their own margins while FedEx saw a 40% drop in last quarter’s profit.
E-commerce giant, Amazon, has built its very own delivery service that has continued to threaten FedEx. Earlier this week, Amazon said it told its third-party sellers, which make up 58% of its total merchandise sales, that they will temporarily be restricted from FedEx’s ground and home delivery for Prime orders. The move came after FedEx ended its ground delivery contract with Amazon in August, and its domestic express contract in June. Amazon has effectively changed its status from FedEx customer to FedEx competitor in this way.
FedEx said on Tuesday that it now expects to earn between $10.25 and $11.50 per share on an adjusted basis, from its prior range of $11 to $13 per share. Wall Street, meanwhile, had expected full-year earnings of $12.03 per share, according to analysts polled by Refinitiv.
