Low price strategy benefitting FedEx Corporation (NYSE:FDX)

Posted by Lynn Eisler September 19, 2013 0 Comment 4042 views

FedEx Corporation (NYSE:FDX) reported its “better-than-expected” earnings-growth as customers across the globe started using its low-price shipping options, more than they had before. This is one trend that market watchers say, is not going to change anytime soon. By revenue, this company is the largest air-cargo shipper in the world. Its competitors have been struggling to keep pace with clients who have been transitioning to cheaper and slower shipping options. The company’s latest results clearly reflect this trend as it reported percentages that were in the double-digit range, in packages that had been shipped via the lower-priced plans.

Cheaper options preferred by customers

FedEx Corporation (NYSE:FDX) executives said that customers have been opting for cheaper delivery-options and that this is not just a trend but will soon become the norm and a large percentage of customers have now moved to this option. Alan Graf, the company’s Chief Financial Officer said that it is not difficult to understand why customers are adopting this change. They just give up a few days and get prices that are significantly lower.

The changes

The company has made various alterations to its delivery options and pricing plan in order to leverage this trend and increase sales. Graf said that he thinks that their price is bang on target, but adds that getting the technicalities right and balancing it perfectly is going to take a little longer. He also said that there was good growth in the International Economy segment which is a low-cost one. The revenue in this segment rose by 9% in the first financial quarter and there was a 15% rise in the packages delivered.

Mr Graf said that the company is embracing the International Economy and that these growth rates are very attractive. He said that the company believes that they will be able to transition successfully onto this new model and grow steadily at the same time.

About Lynn Eisler

Lynn Eisler is a national news reporter focusing on economic issues, data analysis and the financial health of state and local governments. Lynn has been honored with the H.L. Mencken Award for Investigative Reporting, the Champion of Justice Award for reporting on the drug war, and the John Hancock Award for business reporting. Lynn was also a Knight Medical School Fellow at the University of Michigan.

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