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Trading for the stock of Memphis’ largest, locally based public company was halted for a brief time this morning.
FedEx Corp.’s trading was stopped Wednesday, June 28, “pending news.” FedEx Corp. put out a press release at 12:35 p.m. EDT that announced its TNT Express subsidiary was “significantly affected due to the infiltration of an information system virus.”
The package delivery company and its key rival United Parcel Service are facing increasing needs for capital spending in order to support growth.
It’s well known that package delivery giants FedEx Corporation (NYSE:FDX) and United Parcel Service (NYSE:UPS) have a long-term growth opportunity from burgeoning e-commerce deliveries, but what’s less understood is the increasing demand on the networks. It’s creating the necessity for increased capital expenditures, and that’s likely to negatively impact free cash flow generation in the future. Let’s take a closer look.
It is no secret that many think drones – or, to use their technical descriptive, unmanned aerial devices (UAVs) – prove an ideal delivery platform for small packages.
Indeed, there’s been significant testing of them lately for such service: DHL with its “parcelcopter” in 2014 and United Parcel Service with its parcel car-drone combination earlier this year offer up but two commercial examples.
UPS Inc. and FedEx Corp. are offering a new type of pricing for deliveries within a 50-mile radius, according to a person familiar with the companies’ strategy, in a move designed to divert local “last mile” business-to-consumer traffic normally moving with the U.S. Postal Service (USPS).
Short-haul shipments delivered by the two giants would fall under a new “zone 1” rating, according to the person. UPS and FedEx would price those deliveries cheaply, largely because they wouldn’t involve the use of over-the-road, line-haul services that add to the carriers’ costs. The pricing has been made available to a select group of large customers that have requested it, according to the person.
After years of struggling to predict shipping demand for the December peak season, UPS is giving retailers a stronger incentive to provide accurate forecasts.
Consumers love being able to order gifts from online retailers like Amazon.com a few days before Christmas and have the parcels show up on their doorsteps in time for the holiday. After all, anything beats braving the crowds at malls in late December!
However, for package-delivery giants United Parcel Service (NYSE:UPS) and FedEx (NYSE:FDX), this trend has led to one nightmare after another. Some years they have been overwhelmed by demand, leading to missed deliveries. Other years, they have had too much capacity relative to the amount of last-minute shipping demand, driving up costs.
UPS is trying a new tactic to avoid these problems in the future. It will reserve the right to charge retailers if they reserve shipping capacity and then fail to meet their e-commerce targets. This will give retailers an incentive to meet (but not exceed) their forecasts.