This past week, FedEx reported earnings for its first quarter. I can’t remember a tougher earnings call that I’ve listened to in recent memory.  Here are a few notes:

- The company predicts 10% yearly growth in the entire US domestic parcel market between now and 2026.

- The company missed its revenue targets, and its margins declined year over year.  Worse, FedEx lowered guidance for the rest of the year.

- The company had about $450 Million in extra expenses  primarily due to the effects of the current labor market, both direct wage increases and the resulting network inefficiencies caused by not being able to staff their hubs to their designed capacity.

Here’s what FedEx investors are thinking right now, based on their questions from the call, which were asked repeatedly and with a high degree of snark:

1. If FedEx isn’t hitting its margin targets, shouldn’t it stop adding capital expenditures?

2. Does FedEx really think that the situation will stabilize next quarter before it gets better?

3. If the company has such pricing power, why didn’t it increase prices even more to offset the margin contraction?

4. Why is every other company in eCommerce growing margins while yours are contracting?

5. If FedEx is going to grow and have margins continue to decline, why grow at all?

Of course in today’s eCommerce world, if you are not investing you are slowly dying, which is exactly what will continue to happen to FedEx if it doesn’t find a way to either greatly increase its return on invested capital, or find new investors.

What does this mean for those in the eCommerce world?  A few points are obvious from the call.

First - If you are an Amazon seller using FedEx, prepare for a rocky holiday.  It’s possible and even likely that Amazon will ban FedEx yet again from being used by its sellers at some point this holiday.

Second - Expect more surcharges from FedEx than you are used to seeing as the company works to claw back some of the margin it’s lost.

Finally, put me squarely on the side of analysts that seemed incredulous on the call when FedEx said things would stabilize.  There is almost no earthly way FedEx will be able to hire the 95,000 workers it needs to staff its network.  This leads me to the simple conclusion that margins will definitely get worse for the company before they get better.