January 22, 2020

FedEx rolls out Sunday delivery to keep up with e-commerce growth

Move to seven-day service was announced in 2019, could help company bounce back from losses in latest earnings report, FedEx says.

By DC Velocity Staff

Logistics and transportation provider FedEx Corp. has launched its planned expansion of delivery days, announcing today that its FedEx Ground unit has officially started delivering FedEx Home Delivery packages on Sunday for the majority of the U.S. population.

First announced in May 2019, the strategy is a move to serve the fast-growing e-commerce market, and serves to advance the company's effort to transform its global transportation network, Memphis-based FedEx said.

Although FedEx has been working on the expansion for eight months, the change may not have come soon enough to help the company adjust to rising consumer expectations for fast home delivery. In December, FedEx reported that its finances had come in well below investors' expectations for its second quarter results, posting revenue of just $17.3 billion compared to $17.66 billion expected, and earnings per share—a proxy for profits—of just $2.51 compared to $2.78 expected.

One reason for the disappointing balance sheet was the compressed shipping season of the 2019 holiday peak, which cut six days off an already hectic schedule due to a quirk of the calendar that had Thanksgiving falling at its latest possible date, FedEx Chairman and CEO Frederick W. Smith said in a release. In response, the company has expanded to year-round seven-day FedEx Ground delivery, enhanced its large package capabilities, and insourced its FedEx SmartPost package volume, Smith said at the time.

Another reason was FedEx' strained relationship with amazon.com Inc., the Seattle-based "frenemy" firm that supplies FedEx with healthy volumes of parcels with one hand, even as it continues to build out its own private delivery network with the other. In recent months, the two companies have cut their long lasting contracts for both ground-delivery  and air shipping, and then reinstated the use of FedEx's Ground network by Amazon's third-party merchants.

According to FedEx, it is fighting back against those challenging conditions with the expanded delivery plan, claiming that delivering residential packages on Sunday speeds up most shipping lanes by one or two days, an advantage that is particularly valuable for shippers and consumers of healthcare and perishable goods.

Other changes may be in the works, judging by the company's latest earnings statement. "Our revised guidance reflects lower-than-expected revenue at each of our transportation segments and higher-than-expected expenses driven by continued mix shift to residential delivery services," FedEx executive vice president and CFO Alan Graf said in December. "In response, we are implementing reductions to the global FedEx Express air network to better match capacity with demand. We are also further restricting hiring and pursuing opportunities to optimize our networks, including investments in technology aimed at improving our productivity and lowering our costs."

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