Pubished by Zacks Equity Research
FedEx Corporation FDX recently announced its intention to not renew the contract with Amazon.com, Inc. AMZN for providing the latter with domestic express delivery services. However, on cessation of the contract come Jun 30, the company’s relationship with the e-commerce giant will be intact with regard to international services or domestic operations at other units, such as the FedEx Ground.
With the company expecting average daily volume for small parcels in the United States to double by 2026, the decision is aimed at focusing on the broader e-commerce market. Company spokeswoman Katie Wassmer stated that it’s “a strategic decision” to target numerous other retailers, such as Target, Walgreens and Walmart.
Per Wassmer, last year, FedEx generated less than 1.3% of the total revenues from its contract with Amazon. Although insignificant, the company is likely to see a margin decline in the near-term. Meanwhile, FedEx’s rival United Parcel Service, Inc. UPS accounts for a larger share of revenues from its deal with Amazon.