FedEx Corp (NYSE: FDX) said on Wednesday that it would end its ground-delivery contract with Amazon.com Inc (NASDAQ: AMZN) at the end of the month. Amazon will now be forced to come up with a new way to deliver millions of packages as the all-important holiday shopping season draws closer.
“This change is consistent with our strategy to focus on the broader e-commerce market, which the recent announcements related to our FedEx Ground network have us positioned extraordinarily well to do,” FedEx said in a statement.
The move comes nearly two months after the Memphis-based shipping and logistics giant said it would end a contract to fly Amazon’s packages in the United States. Now, the company says it won’t renew its ground-delivery deal with online retailer when it expires at the end of August. Amazon has been relying on FedEx’s ground delivery service for years to get products to customers.
FedEx seems to be slowly cutting its dependence on Amazon as the e-commerce giant continues to create its own shipping network. Amazon is building up its own fleet of air and ground transportation to deliver orders to consumers quickly, while avoiding third-party providers like the U.S. Postal Service, FedEx, and United Parcel Service (NYSE: UPS). Last year, the Seattle-based retailer accounted for less than 1.3% of FedEx’s total revenue.
Nonetheless, FedEx can sever ties with Amazon without suffering extreme damages as brick-and-mortar retailers such as Target Corp (NYSE: TGT) and Walmart Inc (NYSE: WMT) seek a share of the digital market.
“We understand the issues involved in e-commerce and residential delivery, said FedEx CEO Fred Smith during the company’s fourth quarter earnings conference call in June. “We will be the low-cost producer in the e-commerce space for residential deliveries. We are quite confident of that from many perspectives. There will be other things we will announce in FY 2020 in this regard — you can count on it.”
The company has signed up more pick-up and drop-off points with some retailers, and is also testing an autonomous delivery robot. Its shares were down 0.1% to $161 apiece before the opening bell, while those of Amazon dropped 0.4% to $1,781.
FedEx Corp Profile
FedEx pioneered overnight delivery in 1973 and remains the world’s largest express delivery firm. In fiscal 2018, FedEx derived about 55% of its $65 billion top line from its express division, 28% of sales from ground, and 10% from its freight less-than-truckload trucking segment.
FedEx Office provides document production and shipping services, and Trade Networks offers freight forwarding. FedEx acquired Dutch parcel delivery firm TNT Express in 2016. – Warrior Trading News
