uploads///FedEx Ground expansion

Will Ground Operations Expansion Give a Boost to FedEx’s Revenue?

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Sep. 24 2018, Updated 8:00 a.m. ET

FedEx expands ground operations

On September 12, FedEx (FDX) made an important announcement. To place itself firmly in the extremely competitive e-commerce delivery landscape, the company announced the expansion of FedEx Ground’s US operations to six days per week. The courier service provider made this decision in view of strong volume inflow anticipated in this holiday season and beyond.

FedEx stated that the Ground segment’s demand and volume have consistently increased in the last ten years. To provide exceptional service during the busy time, FedEx planned to increase the hours for some of its existing employees. In addition, the company intends to hire ~55,000 positions during the holiday season. FedEx Ground will operate six-day and seven-day operations through the holiday season. The Ground segment will also continue six-day operations throughout its US network year-round.

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Management insights

Raj Subramaniam, FedEx’s executive vice president and chief marketing and communications officer said, “FedEx anticipated early on that the growth of e-commerce would significantly increase demand throughout our network, and we underwent a transformation by opening new facilities and investing in highly-advanced technology and innovations that have resulted in the most automated network in the industry, delivering the speed and reliability our customers value highly.”

FedEx Ground has opened 15 new hubs featuring advanced material-handling systems since 2005. The company’s new hub launch was a part of a network expansion plan to increase daily package volume capacity and boost the speed and service capabilities of its network. FedEx Ground has added ~36 million square feet to its network, including the opening of nine new hubs and 58 automated stations in the past five years.

About XLI

Investors who are bullish on US transportation and logistics stocks can consider investing in the Industrial Select Sector SPDR Fund (XLI). This ETF has a 2.42% weight in FedEx. Other major transportation companies included in XLI’s holdings are Union Pacific (UNP) with a 5.12% weight, United Parcel Service (UPS) with a 3.32% weight, and CSX (CSX) with a 2.7% weight.

Will the US-China trade war impact FedEx’s growth? We’ll look at this question in the next part.

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