FedEx has an opportunity to increase its profits by US$1 billion annually by taking the leverages of its Shop Runner buyout and also partnership with Microsoft. It will depend on its e-commerce presence and ensure to cater directly to its customers according to CitiGroup Analysts.
The brokerage’s report, which also said the company could nearly double its share price in four years from current levels, comes as FedEx struggles with slowing growth after a pandemic-fuelled surge in online shipments. “FedEx could become e-commerce’s universal shopping cart by augmenting ShopRunner’s hundreds of merchant partners to thousands, and building a base of millions of subscribers that would get free expedited shipping,” Citigroup analyst Christian Wetherbee said on Monday.
Memphis, Tennessee-based FedEx acquired e-commerce platform ShopRunner in 2020, while entering into a partnership with Microsoft Corp earlier this year. “By leveraging ShopRunner assets through incremental technology investments with its partner Microsoft, we think FedEx can make itself a bigger part of the checkout process, increasing its role in the e-commerce sales experience,” the analyst said. Wetherbee said currently consumers have little or no choice over which company delivers the products they have bought online.
Overcoming losses
In March, FedEx posted lower-than-expected quarterly earnings, hit by ongoing labor woes and the Omicron outbreak, and said second-half ground margins would miss internal targets. E-commerce shipments fueled revenue at FedEx and United Parcel Service during the COVID-19 pandemic. But FedEx has been less successful than its rival at translating that additional business into profit.
