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Amazon's move into Whole Foods stores isn't going to hurt couriers, FedEx CEO says

  • In buying Whole Foods, Amazon wanted to get into the grocery business, not to become a business courier, FedEx CEO Fred Smith says.
  • "E-commerce is not going to eliminate the retailing sector of the country," he tells investors.
  • Still, FedEx lowered its 2018 earnings outlook.
Frederick 'Fred' Smith
Joshua Roberts | Bloomberg | Getty Images
Frederick 'Fred' Smith

FedEx's CEO had an undaunted response when asked on a call with analysts and investors about how Amazon's purchase of Whole Foods Markets may disrupt retailers and the courier business.

"E-commerce is not going to eliminate the retailing sector of the country," FedEx CEO Fred Smith said Tuesday. "It's about 10 percent now. It's certainly going to grow as a percentage. But will it be half? I doubt it."

E-commerce represented a little more than 8 percent of total U.S. retail sales through the first three quarters of 2016, according to data from Nielsen. The firm has projected that rate will grow by as much as 12.2 percent through 2020.

Deloitte is expecting total retail sales this holiday season to grow by as much as 4.5 percent, up from last year's 3.6 percent increase. E-commerce sales are expected to climb 18 to 21 percent this year, with more shoppers ringing up gifts online.

"I think you're going to see e-tailers become more brick-and-mortar," Smith added. "And I think you're going to see brick-and-mortar become more e-tailers. And how that all shakes out, I don't know."

In buying Whole Foods, Amazon wanted to get into the grocery business, but not with the goal of becoming a business courier, Smith said.

"Groceries are heavy, hard to handle, people like to come and see the produce and so forth," he said.

During the call, FedEx's chief marketing and communications officer, Rajesh Subramaniam, added: "More and more retailers are evolving their business model to compete with pure-play e-tailers, and we see this as an opportunity to provide even better value for our customers — whether it's fulfilling from store or a [distribution center]."

FedEx's share price was up 3 percent Wednesday. After Tuesday's closing bell, FedEx lowered its 2018 earnings outlook to account for the impact of the TNT Express cyberattack in June and said Hurricane Harvey also negatively impacted its fiscal first-quarter results.

FedEx shares have climbed more than 17 percent in 2017, and are up more than 30 percent over the past 12 months. Rival UPS' shares are up about 2 percent this year.

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