USPS actions may impact FedEx profits

Fedex logoThe Wall Street Journal says that moves by the USPS will play a role in FedEx’s ability to meet its profit targets this year. FedEx results for the first quarter are due Wednesday:

And competition is picking up. The U.S. Postal Service this month cut rates on some Priority Mail packages to compete more effectively with both FedEx and rival United Parcel Service Inc. Tech companies ranging from Google Inc. to Uber Technologies Inc. to Amazon.com Inc. are trying out deliveries themselves.

FedEx said in its fourth quarter that a large customer left and caused the package volume at its no-frills Smartpost business to fall by 8%. Analysts say it was Amazon, and that it moved an estimated 50 million to 60 million packages annually to a mixture of UPS, the USPS and smaller regional delivery companies. FedEx declined to comment because the company is in its quiet period ahead of earnings.

Both UPS and FedEx are effectively increasing prices on ground shipments next year, charging by package size, instead of weight alone. While that move could boost profit, some analysts have cautioned it could backfire by encouraging customers to move their business to either the Postal Service or regional delivery companies. An additional factor: It’s more expensive to keep more box sizes on hand.

Read more: Will FedEx Deliver on Its Target? – WSJ.

  • Nate in Networks

    Dang, now would be a good time for FED EX to drop the contract they have with us. If the USPS had to suddenly find guaranteed shippers for their mail, they would be out of luck. That would be a perfect storm, an influx of new mail, due to the postage drop for Priority, combined with the fact that there would be no way for the PO to ship the mail across the country. Commercial flights, neh, they would only accept so much mail, and would turn mail back as they did in the early 90’s, after the PO dropped contracts they had at the time. Trucks, sure that would work, but slower service yet, and more delays due to bad weather. just a possible scenario.

  • paul

    Nate,
    FedEx won a $10.5 Billion, 7 year contract to transport USPS mail in April 2013. One, they can’t just refuse to honor that contract, and, two, do you really think they could just walk away from a guaranteed $1.5 billion per year in guaranteed income? That would certainly help thier bottom line.

  • chuck

    Fedex would go under if they lost those postal contracts

  • Randy J Kowal

    The Post Office doesn’t have to make a profit, just cover operation expenses. I’m 100% for the USPS providing a SERVICE to the American people, not a profit in some shareholder’s pocket.