FedEx Corporation (NYSE:FDX) Q3 2018 Earnings Conference Call - Final Transcript

Mar 20, 2018 • 05:00 pm ET

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FedEx Corporation (NYSE:FDX) Q3 2018 Earnings Conference Call - Final Transcript

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Q & A
Executive
Frederick W. Smith

Thank you, Dave. We have several questions on the marketing front, which I'll ask Raj to answer. One, how important are FedEx Fulfillment, FedEx Supply Chain and other logistics offerings to the long-term strategy at FedEx. How attractive are contract, logistics, end markets versus traditional courier business; that's from Brandon Oglenski of Barclays. Raj?

Executive
Rajesh Subramaniam

Brandon, thank you for your question. Our strategy is to really offer value-added services to our customers that result in more volume through all our core transportation networks.

And as Alan pointed out, we recently completed a reorganization that allows us to offer a portfolio of solutions in a more seamless manner to our customers. I also want to point out here that this is particularly important to our profitable small and medium customer segment as they expand their e-commerce offerings. Thank you.

Executive
Frederick W. Smith

Our next question on marketing is from Ken Hoexter of BofA Merrill Lynch. Raj, thoughts on postal commissions, rule-making, hearing process and potential impact to industry rates?

Executive
Rajesh Subramaniam

Ken, FedEx is not participating in the PRC Docket, but we expect a final ruling to be issued this year. However, we continue to monitor PRC regulatory developments with a view to the pricing aspect of it. And we totally believe that, over the cost of last-mile delivery, we'll continue to go up in the years ahead.

Executive
Frederick W. Smith

From Matthew Reustle, Goldman Sachs. Reustle, I hope I pronounce that right, Matthew. Can you talk about your views on the future of consumer delivery? Do you think solutions such as FedEx OnSite can represent a material percentage of the market relative to residential delivery?

Executive
Rajesh Subramaniam

Matt, we don't view OnSite in terms of percentage of residential market. Rather, we think it's a matter of customer convenience. What we know from e-commerce demand as it continues to increase that there's increasing demand from consumers to have convenient options where they can reliably receive their packages. In this context, we're very excited about the rollout of our FedEx OnSite program.

As I mentioned earlier, we have more than 10,000 FedEx OnSite locations in the U.S. including FedEx Office and we've dramatically increased our presence with Walgreens adding more than 8,000 locations in the last year alone. And we're very happy with the performance of this network so far.

Let me add one other point, technology solutions are also going to be critical in this regard. I mean, that's why we're very excited about the fact that our FedEx Delivery Manager user base continues to grow significantly. Ultimately, combination of these things, including our retail network or technology, these things will result in win-win-win solutions for our shipper, for our consumer and for FedEx. Thank you.

Executive
Frederick W. Smith

And Raj, I think, I'm correct. The 2000s Rite Aids that Walgreens acquired as soon as they are re-branded and put in the Walgreens system will be 2000 additional OnSite locations. Correct?

Executive
Rajesh Subramaniam

Yes. They will get added in the next few months here.

Executive
Frederick W. Smith

Let me give Raj a breather, and ask Dave Bronczek to answer a follow-on