President and COO resigns
Shares of FedEx (FDX) fell 2.5% on February 15 after the company revealed in an SEC (Securities and Exchange Commission) filing that its president and COO, David Bronczek, had decided to step down from his position effective February 28.
Bronczek’s sudden resignation was surprising, as he’d been appointed to the company’s board just days ago, on January 28. Investors find it unusual and worry about what unexpected things may have happened since he joined the board.
However, in the SEC filing, FedEx said that Bronczek’s resignation was his personal decision and wasn’t the result of any dispute with the company or any matter relating to operations, policies, or practices. FedEx’s chair and CEO, Frederick W. Smith, said in a press release on February 14, “On behalf of the Board and management team, we recognize Dave for his years of service to FedEx. FedEx has a deep bench of talent, and I am confident that the transition will be seamless.”
The 64-year-old Bronczek has been with FedEx for the last 42 years. In early 2017, management appointed him as the company’s president and COO. Before that, he led the FedEx Express business unit for 17 years. The company announced that Raj Subramaniam would take on Bronczek’s role effective March 1.
This was the second time in the last three months a key executive had resigned suddenly from his position at FedEx. In December 2018, the president and chief executive of the FedEx Express division, David Cunningham, retired. He had been heading the segment since early 2017. On January 1, 2019, Subramaniam was promoted and took charge of the position left open by Cunningham.
Sudden departures in key management positions could increase FedEx’s challenges further. The company is already concerned about a possible slowdown in its international business. In its fiscal 2019 second-quarter earnings results, which it reported on December 18, 2018, the company stated that global trade had been slowing and could decelerate even further in the coming months.
FedEx lowered its fiscal 2019 earnings outlook, citing weakness in its international business, mainly in Europe. The company noted that a contraction in Germany’s GDP, a significant slowdown in the United Kingdom due to Brexit uncertainty, and protests in France had hurt its international business. Management noted that these factors could affect other European countries and slow down growth in Asian economies as well.
YTD (year-to-date), FedEx stock has risen 11.1%. Other major third-party logistics companies (IYT) United Parcel Service (UPS), C.H. Robinson Worldwide (CHRW), and Expeditors International of Washington (EXPD) are up 13.7%, 8.8%, and 8.2%, respectively, YTD.