The margin confusion points to a key financial reasoning for FedEx's choice earlier this month not to renew its US air contract with Amazon. "We didn't just decide to do it for the hell of it, and it reminds me a little bit about that old adage of Mike Tyson that everybody's got a plan till they get hit in the mouth."Īmazon is a prime example of low margins and high business "The only way I can respond to that is obviously the plans and the programs we put in place were designed to create superior returns," Smith responded. To save as much as $1.3 billion in Chinese deals, the package giant is now suing the Trump administration. Read more: China might blacklist FedEx for not delivering Huawei phones. "At what point do we question the scale of the Express networks?" the Barclays analyst Brandon Oglenski asked FedEx's CEO and founder, Fred Smith, during a call with investors on Tuesday, adding: "Because we've seen decade after decade of low returns, low margins, and peak economic activity that can't put in a pretty good return, but still never really crossing that threshold of covering the cost of capital."
Analysts say margins at Express have declined in recent years, partially because of that mismatch in Express' network and the fastest-growing delivery segments.
FedEx's air cargo network was built to carry priority, overnight shipments to deliver before certain times, but e-commerce doesn't have the same time crunch or service demands.
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