Over the past few months, talk has been building about Amazon working on its own logistics service to compete against FedEx and UPS, especially after the e-commerce giant recently confirmed it plans to lease a fleet of 20 jet airplanes.
Now, FedEx has finally responded to the rumors.
FedEx CEO Mike Glenn stated “While recent stories and reports of a new entity competing with the three major carriers in the United States grabs headlines, the reality is it will be a daunting task requiring tens of billions of dollars in capital and years to build sufficient scale and density to replicate existing networks like FedEx.”
Glenn also said that he’s been aware of Amazon’s need to ramp up its logistics capabilities, and acknowledged that Amazon is supplementing FedEx with its own services. But those investments don’t mean that Amazon will stop using FedEx, he said.
“Amazon is a valuable customer that we’ve worked with for many years and we expect to work with them for many years to come,” Glenn said.
And even if Amazon decided to stop using FedEx, the shipping company would still be fine, according to Glenn.
“No one FedEx customer represents more than approximately 3% of total revenue,” he said. “We manage these relationships carefully to ensure we don’t become overly dependent on any one customer.”
While Glenn is certain, analysts are split on Amazon’s ultimate logistics strategy.
Read: FedEx Isn’t Worried About Amazon or Uber Delivery
FedEx Reports Robust Adjusted Earnings for Third Quarter
A strong peak season and sustained e-commerce demand is giving FedEx Corp. shareholders reason to cheer.
FedEx Corp. reported adjusted earnings of $2.51 per diluted share for the third quarter ended February 29, compared to adjusted earnings of $2.03 per diluted share a year ago. Without adjustments, FedEx reported earnings of $1.84 for the third quarter compared to $2.18 per diluted share last year.
This year’s quarterly consolidated earnings have been adjusted for expenses related to certain legal matters ($0.61 per diluted share) and the pending acquisition of TNT Express ($0.06 per diluted share).
Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer, told analysts that the company’s strong financial performance was driven by increasing demand for its “broad portfolio of FedEx business solutions.”
At the same time, he maintained that retailers should be paying more for shipments to keep costs from e-commerce contained.
Jerry Hempstead, President, of Hempstead Consulting, sat in on the call and noted that the “incredible increase” was a consequence of careful planning.
“Their margins improved considerably over the prior year driven by increases in package volumes,” he said. “It was also due to all the yield improvement pricing actions they have taken over the last few years that are now compounding.”
Hempstead, who provided insight for shippers in this year’s annual rate forecast, also observed that Fedex took the opportunity during the investor call to announce another yield improving rule change that becomes effective June 1.
“I expect the UPS to quickly announce their match of this move,” added Hempstead.
Related: Amazon Logistics Services - The Future of Logistics?
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