What the Catastrophic FedEx News Tell Us About the Future
The gigantic company made a decision that shocked the entire world just before Black Friday.
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As pointed out by Glenn Hubbard & Tony O’Brien, The Wall Street Journal published a piece a few weeks ago with the title “Economic Worries, Weak FedEx Results Push Stocks Lower.” According to the article, the company’s downbeat expectations intensified investors’ macroeconomic anxieties.
Why would news that FedEx made less money than expected cause stock market indexes like the Dow Jones and the S&P 500 to fall?
Delivery firms like FedEx are the canary in the coal mine (thanks to Joseph Brown to remind me of this analogy) for the economy. In other words, investors looked at the drop in FedEx’s sales as an early sign of a drop in the business cycle and the entire economy.
Delivery companies deliver less because people are buying less. Simple as it is.
But the fact that FedEx had negative results and their shares plunged almost 20% when they released results… that was not the shocking part. Not even close.
Black Friday is (by far) the most important date for delivery companies
Delivery companies like Amazon or FedEx often hire thousands of seasonal workers to increase their capacity and attend to the enormous volume of orders between Black Friday and Christmas.
This is what happened in 2020, for example:
You may say now “Well, this was 2020, and people were locked inside their homes due to the pandemic, so naturally, there were more deliveries due to expanded online shopping.
Not really. Let’s take a look at 2018, way before any lockdown pumps online sales.
UPS, one of the largest and most well-known competitors of Fedex, had one of the largest hiring processes in recorded history so they could have manpower enough to deliver all online sales of Black Friday and Christmas.