Fedex CEO optimistic
Smith touches on Amazon, COVID-19 in letter to shareholders,
Fedex Chairman and CEO Fred Smith detailed the “challenge and change” his company is encountering in his annual letter to shareholders, touching on the COVID-19 pandemic, Amazon and technological innovation.
COVID-19 has added uncertainty to the global economy, which was already seeing slowing industrial activity, Smith said. Still, the Memphis logistics giant has “enormous cause for optimism” as it keeps delivering during the crisis, he added.
Fedex’s most recent quarterly results beat Wall Street’s tepid expectations, as home delivery volumes jumped and valuable commercial volume showed signs of a rebound.
Smith said, “while our strategic course at Fedex was plotted long before COVID-19 entered the picture, in many ways, the world accelerated to meet our existing strategy.” Fedex has made “an enormous shift in direction” since fiscal year 2019, he said, as the company went “all-in on e-commerce.”
This shift is happening without Amazon, as Fedex ended its two major shipping contracts with the online shopping giant.
“It was the correct decision to end these contracts — which were not longterm in nature and were declining in profitability — and train our eye on the larger e-commerce market,” Smith said. “While the Amazon volume represented only a small portion of Fedex revenue, the last bit of volume has significant flow-through to the bottom line. Fedex was adversely affected; however, we have closed additional business to replace this volume and have taken out costs related to Amazon’s requirements.”
The company has announced several initiatives at Fedex Ground to capture more e-commerce business. These include expanding home deliveries to seven days a week, keeping packages it would have handed to the U.S. Postal Service and investing in better handling of large items.
While Fedex Ground is seeing a surge in package volume, Fedex Express is flying more often. Fedex flew 530 additional flights in its most recent quarter, Smith said, as global air cargo capacity tightened due to the grounding of passenger planes.
Fedex’s transportation response to the pandemic has included moving more than 36 kilotons of protective gear, adding 28 flight legs to help transport COVID-19 test specimens in the U.S. and facilitating more than 7,300 humanitarian aid shipments through its nonprofit collaborations.
“We’ve shown our mettle amid a global crisis, and the world will continue to look to Fedex to deliver critical cargo,” Smith said.
Smith also noted in his letter the technological advancements Fedex is making. Roxo, Fedex’s much-publicized autonomous delivery robot, is being prepared for a second round of testing. The company is “making progress on legislation and regulatory approvals” for it, he said.
“There is much discussion of how autonomous robots like ours could help within a global pandemic like COVID-19, and we’ll come out of this pandemic with a greater understanding of how Fedex can benefit customers — and society — through these devices,” Smith said.
Fedex has also launched Senseaware ID, which will provide real-time package tracking in the Fedex Express network, Smith said. The device will roll out nationwide by September, initially being limited to the company’s First Overnight packages in the U.S.
Smith’s letter to shareholders is available to view on Fedex’s website.
Max Garland covers Fedex, logistics and health care for The Commercial Appeal. Reach him at max.garland@commercialappeal.com or 901-529-2651 and on Twitter @Maxgarlandtypes.