FedEx Fighting To Stay Afloat?
Faced with falling revenue, FedEx is closing brick-and-mortar locations and grounding some of its aircraft.
In recent news of the upcoming recession that we’ve all been hearing about, some believe that we are getting closer as FedEx is reporting its quarterly revenue fell below its expectations. In addition, it is closing some offices and grounding some of its aircraft because of the declining volumes of packages that are (or aren’t) moving around the world.
Although worldwide, stocks are down, and the US especially seems to be having a hard time bouncing back to “normal” economically from the COVID-19 pandemic, other reports show that many sectors are healthy and even enjoying an uptick in work. As Tell Me Best recently reported, Amazon has overtaken FedEx in the overall amount of deliveries. Now, what is Amazon known for? If you said deliveries, you’d be wrong. It’s simply a buying hub, that happens to deliver.
Maybe, just maybe purchasing habits are changing. And your Aunt Barb is no longer sending you sweaters. She simply sends you an Amazon gift card. That may be another way to look at this.
However, according to CNN, FedEx CEO Raj Subramaniam said that “the numbers..don’t portend very well.” So, although it makes for very good headline fodder, he did not say a global recession was coming. He said the numbers aren’t good, but, he certainly could mean his numbers don’t look good–because they don’t.
Shares of FedEx dropped by 21% today and it tops the brand’s 16% plunge in 1987 on the day the stock market crashed, as well as the 15% drop it experienced in the early days of the COVID-19 pandemic. It still has a spending budget that will extend into 2023 of $6.3 billion. Say goodbye to your neighborhood FedEx (possibly) because the company is also closing 90 FedEx locations and five corporate offices. As Tell Me Best reported, not once, but twice, FedEx has warned that it may not be able to deliver holiday packages (again) this year due to contractors threatening to cease their operations.
The FedEx Model
FedEx drivers are not direct employees of FedEx. They are independent contractors and some of them even have their own network of hundreds of drivers. Because of the cost of fuel, 30% of those contractors are now losing money. It would be illegal for the contractors to create a union, but there are rumors that some are just going to stop operating.
In positive news, FedEx had rolled out a feature that shows consumers where their parcel has been dropped off when it was delivered at a house or building by taking a picture and sending it to the recipient. This was done to help with an uptick in people stealing awaiting packages at the front door. Guess who already has been doing this? Yup, you guessed it; Amazon. Maybe they are just a little behind the times.
Unfortunately, it seems that the FedEx brand of autonomous planes they were going to use to deliver packages may be put on hold. We’re really sure how pilot-less planes would work anyway in the crowded skies of the U.S. They may have use when it comes to delivering humanitarian aid and critical medical supplies in dangerous areas, however.
All that said, what’s the final takeaway? Drumroll, please. Recession or not, that sweater Aunt Barb sends, it’s definitely going to be an Amazon gift card this year.
