FedEx, UPS Shrug Off Amazon Challenge...For Now

Shares of FedEx Corporation FDX and United Parcel Service Inc. UPS are holding up relatively well on Thursday after Bloomberg reported Amazon.com, Inc. AMZN is testing its own delivery program called Seller Flex. Amazon has a long track record of disrupting entire businesses and crushing its competition, but shares of UPS and FedEx were both down less than 2 percent on Thursday in the wake of the news.

One of the reasons for the muted market reaction may be that Amazon’s efforts to control more of the delivery end of its business are not particularly shocking. Back in December of last year, JPMorgan analyst Brian Ossenbeck said Amazon wants to control its own destiny, but he sees its delivery expansion as more of a threat to the USPS than to UPS or FedEx.

“Amazon’s fulfillment service incentivizes sellers to increase product velocity in peak season, so its efforts to supplement capacity but not supplant UPS and FedEx hold some merit,” Ossenbeck wrote. “The USPS appears more at risk should Amazon focus on high-density urban routes.”

FedEx and UPS’ modest pullback is a far cry from the sell-offs grocery stocks endured back in June when Amazon announced its buyout of Whole Foods. Target Corporation TGT shares initially tumbled 5 percent, Sprouts Farmers Market Inc SFM dropped 7 percent and Kroger Co KR stock dropped 12 percent.

Neither FedEx nor UPS demonstrated much follow-through selling on Thursday morning after their initial drops. Traders will be watching the stocks closely to see if they completely fill Thursday morning’s gap and then resume a downward trajectory or if the Amazon dip will serve as a buying opportunity.

Joel Elconin contributed to this report.

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