Why Fedex will buy Hermes
In the past, FedEx focused exclusively on the express business. There was no room for future-oriented investments in a delivery network supported by e-commerce. The arrogance towards Amazon Logistics is fueling the question of the logistics company's survival. Shareholders expect substantial steps to be taken - the takeover of Hermes could be one such step. Can FedEx as an investor solve the structural dilemma with Hermes?
FedEx's share price is a revelation: -33% in the last 12 months, significantly worse than major competitors such as UPS, and many analysts agree that the measures taken so far, including the separation from Amazon or the purchase of TNT, are a full 3-5 years too late. The pressure for concrete results is high - and Germany, alongside the UK and France, has been proclaimed the main "battle-to-win" for B2C delivery.
FedEx needs action - will it succeed in entering the European market with Hermes shares?
The situation at FedEx provides a "glimpse into a possible future", especially for DHL after its strategy disaster.
"In Europe, we are simplifying our pricing structures and are opening the valve for e-commerce for the first time ever to further stimulate growth. ... We are very excited about the e-commerce potential for our European business."
Brie Carere, FedEx CMO
Hermes offers an interesting profile for FedEx with its own delivery in the UK and Germany. According to its own information, Hermes has the largest shipping network in the UK (245 million shipments p.a., 10,000 delivery staff, 5,000 parcel stores, customers such as Tesco, Asos, John Lewis, Debenhams etc.). Even though Hermes ships in France with Mondial Relay as a partner, this is also another focus market. According to the Otto 18/19 annual report, these three markets were also key drivers of sales at Hermes. This strength profile corresponds exactly to the requirements that would be interesting for FedEx positioning.
Even though the acquisition of TNT is unlikely to have been digested either organizationally or in terms of price ( 1.7 billion dollars in integration costs alone), FedEx appears to us to be a potential major investor for Hermes.
Is the logistics sprinter FedEx running out of steam on the last mile?
In its core business, Fedex itself overslept the last mile in e-commerce for years. Express delivery as a solution for the requirements of online retail is long outdated. Perseverance over the last mile will determine whether FedEx has actually recognized the structural weaknesses of the delivery network. FedEx therefore appears to us to be more of a "keep it up" investor for Hermes.