FedEx Corp. Chief Executive Fred Smith wakes up worrying about competition with Amazon.com Inc.
Well, duh, you say?
Yes, if not for the fact that Smith called the notion of Amazon.com AMZN, -0.28% being a competitor “fantastical” just nine short months ago. Concerns about Amazon competition were part of a “misunderstanding” and he doubted the e-commerce giant would ever be a “peer competitor,” Smith said in December.
That tune changed this week:
‘We basically compete in an ecosphere that’s got five entities in it. There’s UPS, there’s DHL, there’s the U.S. Postal Service, and now increasingly, there’s Amazon. That’s who we wake up every day trying to think about how we compete against and give the best services to our sales force.’
That was Smith’s response to a question by Barclays Capital analyst Brandon Oglenski, according to a transcript of the late Tuesday post-results call provided by FactSet.
Oglenski asked what Smith would tell investors about FedEx’s FDX, -12.92% “process for looking at things that maybe didn’t pan out quite as well as you thought?”
Besides acknowledging Amazon as a rival, Smith also directed a fair amount of snark toward Oglenski and other analysts that have doubted certain aspects of FedEx’s trajectory.
Smith called FedEx Express “very profitable” in the U.S. despite some doubts about that in the analyst community.
“FedEx will unquestionably be the low-cost producer in the domestic Express business because of the fleet modernization. And that includes any new entrants into the business,” he said, right before naming the “ecosphere” of competitors.
“So the reason I’m going on about this, I’m not quite sure how this mantra got started that we’re hardheaded or we’re not willing to look, we’ll look at anything, but what we can’t do is to change the reality of the math,” he said. “We can’t make the competition go away. I wish they would, you know, just leave the field. They’re very good operators.”
Smith, one of the most vocal U.S. executives in his opposition to recent trade policies, reiterated some of that criticism on the call.
“I think it’s not just the US, I think China’s also pursuing bad trade policy,” he said. “So you’re taking a system over the last 70 years that’s drawn more people out of poverty than in the entire previous history of the world and essentially putting it all at risk.”
FedEx in August ended its contract to deliver Amazon.com Inc.’s ground packages, and in June ended its FedEx Express domestic contract with e-commerce giant.
FedEx late Tuesday reported lower-than-expected adjusted profit for the fiscal first quarter and cut its fiscal 2020 outlook, triggering several stock downgrades from Wall Street analysts on Wednesday.
The stock on Wednesday was headed to its lowest close in more than three years. FedEx shares have lost 7% this year, contrasting with gains of 20% and 16% for the S&P 500 index SPX, +0.03% and the Dow Jones Industrial Average. DJIA, +0.13%