The Fall and Fall of FedEx: UPS Wins USPS Air Cargo Contract
It seems to me like for some time, the industry has felt this wounded animal in FedEx, and it's pretty clear that this will not stop until new management is brought in.
- FedEx's laugh at Amazon, and subsequent silly spat, which we know who ended up winning that one.
- The continued rise of regional carriers in the last 10 years based on the success of zone-skipping as a rate reduction strategy.
- Fred Smith stepping down as CEO in 2022.
- FedEx failing to integrate its air and ground networks for over 20 years.
- FedEx's declining volume throughout 2023, along with other carriers, as part of the decline in volume of traditional mid-market customers.
In the face of all this, the fact that the UPS won a "significant" new contract from the US Postal Service for its air cargo is almost an afterthought.
Obviously it's a lot of consistent volume that FedEx will have to replace. No doubt FedEx will spin the next earnings call as our "revenue per piece has skyrocketed". Which, it's not wrong.
But in a volume game like supply chain, your success needs to be a volume story. If you are Amazon, your guaranteed volume shipper is Amazon.
If you're UPS, it's a different story. Millions of small businesses rely on UPS. UPS is making a concerted push into large healthcare customers.
There are some on this channel which have thought about having FedEx merge with Walmart. That's not going to happen - at least not in the current form. What is likely to happen next is one of two things:
* A new activist investor with a new hero CEO will arrive, or
* The company will be re-broken up and sold for parts.
All this leaves us with a key question - what is the value of FedEx at this point?
To me three things:
* Over 2,000 FedEx office (nee' Kinkos 2004)
* FedEx Ground
* FedEx Air (the heritage)
If something is going to happen with Amazon or Walmart, it's totally possible those FedEx office locations are perhaps one of hte most lucrative elements left standing.
