Getting rid of Amazon’s business has caused investors and analysts some concern about FedEx.

Since FedEx is already facing higher costs, the lower revenue as a result of the Amazon business decision and an 11% drop in first quarter profit sent stock down on Wednesday, to its worst single-day decline in a decade (ref WSJ).  Global trade is showing up as the major problem, currently, as China’s industrial production has fallen to its slowest pace in 17 years.  Thus, any slowdown in the normal course of business makes the company’s Amazon decision come to the forefront, even though Amazon represented only 1% of FedEx revenue for last year.  Still, Amazon spends $31 billion a year in shipping costs (not all of it with FedEx, certainly), so, in essence, analysts are concerned that FedEx has “exed” one of the biggest shippers.  FedEx has explained that it was “taking out significant costs, which were unique to Amazon’s requirement,” (ref WSJ).  It seems reasonable that FedEx will be better off ultimately without the hassle of marching to Amazon’s drumbeat and its demanding delivery schedule.  In the short-term, of course, the business will experience some downturn (as witness the stock market reaction).  I’d say that the most troubling aspect is that of Amazon’s becoming a clear-cut competitor – but they were planning on doing that anyway and nothing that FedEx could have done would have actually stopped the Amazon trajectory.  Amazon has poured billions into ramping up its home delivery and the company also puts a large portion of its operating cash flow back into capital investments each year to expand its business.  That amount is expected to be around $42 billion this year – or, approximately eight times what FedEx generated in cash from operations in its most recent fiscal year.  FedEx has some well-grounded plans to return to its original mission of business-to-business ground delivery.  And, it’s my assumption that after a full year without Amazon’s drag, there will be change that can be appreciated.

ALL THE MOVING PARTS: A company’s composition must reflect good attention to all of its corporate component parts.

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