January 6, 2020
FedEx CFO Responds to “Horrific” Income Drop
As more companies enter the shipping business, and more consumers demand faster shipping times, longstanding brands face greater logistical and financial challenges. For the past year, stalwart industry leader FedEx has been struggling. Recently, the company posted a net income that’s 40% lower than the same period the prior year. Revenue is down as well, leading to a significant drop in operating income.
FedEx CFO Alan Graf didn’t mince words, though he did promise the downturn was temporary, saying in an analyst call reported by business media, “We are at the bottom… Our adjusted operating profit decline is horrific… it’s going to improve. We’re going to come off the mat and improve into next year…”
Analysts point to several different reasons why FedEx is struggling over the past year, blaming international trade disputes and Thanksgiving falling later in the month. But it was one big factor that many pointed to, which also has a PR component. FedEx lost Amazon as a customer.
Thanks to Amazon Prime, free, two-day shipping is becoming the norm for many millions of consumers. FedEx struggled to keep up with those demands, as well as the sheer volume of Amazon’s insatiable, growing customer base. The company continued to fail to meet Amazon’s higher standards, so the two shipping giants parted ways. In fact, Amazon recently announced it would no longer allow even third-party sellers to use FedEx to ship prime packages, citing complaints and other performance issues.
FedEx immediately ramped up investment in its own weekend ground shipping services, hoping to make up or even outpace what it lost with Amazon’s departure. But it still has to get over the uninvited consumer barrage of negative PR being hurled its direction.
Look at just about any article or post related to FedEx and Amazon parting ways, and you find frustrated consumers complaining about the same kind of “performance deficiencies” Amazon cited, from damaged packaging to late shipments, to other standard consumer frustrations.
While it might be tempting for FedEx to write those off as nothing more than keyboard warriors venting into the social media feeds, given the shipping options available, as well as Amazon gobbling up market share, the company can’t afford to ignore public opinion about their service quality. Something needs to be done – and convincingly communicated – soon, or the optimism FedEx is showing about a turnaround in 2020, might be delivered too little too late.