FedEx (FDX), UPS (UPS) Fall on Fears Jeff Bezos Will Hatchet Margins
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FedEx (NYSE: FDX) and UPS (NYSE: UPS) have a new acronym to worry about … SWA.
The letters stand for “Shipping with Amazon”, Amazon.com’s (Nasdaq: AMZN) shipping service for businesses.
Sources told the Wall Street Journal that Amazon is planning to launch the delivery service for businesses and position it to compete directly with UPS and FedEx. The program will roll out in Los Angeles in weeks with third-party merchants selling goods on Amazon.com. The plan is to expand to more cities, and it will eventually be opened to other businesses.
Given Amazon and CEO Jeff Bezos’ knack for causing disruption, investors didn’t take the rumor lightly. UPS dropped 5% and FedEx decline by 4%, despite broad strength in the S&P 500.
Amazon has been slowly adding to its logistics capabilities over the years, so today’s rumor probably isn’t a complete surprise to many investors. What is surprising, however, is an overt reference in the Wall Street Journal article to Amazon’s plans to “undercut UPS and FedEx on pricing.”
Over the years, Bezos has proved to be the bane of margins for brick and mortar retailers, so concerns from UPS and FedEx investors are justifiably, though slightly premature. UPS and FedEx have a massive network and it is unclear yet if Amazon will truly pose a threat.
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