FedEx Corp. (CCJ Top 250, No.1) announced on Thursday the spin-off of its less-than-truckload freight business, FedEx Freight, to a separate publicly traded company.
The spin-off is planned to be completed within the next 18 months, with the goal of unlocking growth opportunities for both entities and enabling customized operations strategy and financial autonomy. However, Satish Jindel, founder of shipping consultancy ShipMatrix and president of SJ Consulting Group, pointed out that the significant impact that FedEx Freight would have as an independent entity could be diluted by the timing of its completion.
“I think the slow speed of which they are acting on it is not helping the company with what they were looking to do out of it,” Jindel said, "and for competitors who were expecting it, now that they have confirmation, it gives them 12 to 18 months to prepare for whatever changes it will bring that they can be better positioned to compete.”
Raj Subramaniam, FedEx Corp. president and CEO, said it was the “right time” to pursue a separation to respond to the “unique dynamics of the LTL market."
He noted on a call with analysts Thursday that FedEx Freight becomes the leading LTL pure-play, and the largest carrier by revenue with the broadest network and the fastest transit times. FedEx Freight had a revenue of $9.4 billion in the fiscal year 2024, representing approximately 12% of FedEx’s total revenue of $78.3 billion.
"Freight has maintained its leading market share position for a long time and increased operating profit nearly 25% on average per year over the last five years," he said. "Areas where we see the greatest opportunity include: first, an expanded dedicated LTL sales force... We've already begun to build out this team and we expect to add more than 300 LTL specialists by the time of separation."
FedEx Freight's portfolio of solutions includes both priority and economy services, and it will continue to provide line haul for FedEx strategically, including Tricolor, peak season and dry aged support.
Brie Carere, executive vice president and chief customer officer for FedEx Corporation, added that spinning off the freight business gives the new company "an opportunity to play offense," and seek out more LTL business. "We are going to invest commercially in new salespeople. We know we've got an opportunity from a different industrial mix."
"While our weight is down right now in our base because of the macro, when we look competitively, we think there is some opportunity using technology to fill up the capacity," she added. "We know the FedEx Freight network right now can run very comfortably at 100 and 105. So we've got some opportunity to be a little bit more strategic, also to look at the 3PL market. So the answer is yes, we're going to play more offense, and we think there's some great things to come."
Scooter Sayers, founder of Sayers Logistics, said that the spin-off will make FedEx Freight an even more formidable competitor, besides being a positive impact for the rest of other LTL carriers, too. “The combination of FedEx Freight being spun off and Yellow out of the picture, what you have left are a good number of large and profitable and well-run LTL carriers, both public and private,” Sayers said.
This would incentivize players in the market, including FedEx Freight, to step up their strategies, get more efficient, and offer more value to customers, Sayers added.
Jindel also said that FedEx Freight as a standalone entity could “include more discipline in pricing, and more discipline in how shippers are palletizing the shipments.”
