FedEx Shares Slip After Amazon Blocks Third Party Sellers From its Ground Delivery Service

Amazon has blocked third party sellers from using FedEx's ground services into the final days of the holiday season as the spat between the two groups intensifies.
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FedEx Corp. (FDX) - Get Report shares  edged lower Tuesday after Amazon Inc. (AMZN) - Get Report said it would block third-party sellers from using the package delivery group's ground service for Prime orders during the final days of the holiday season.

Amazon said third party sellers -- which make up around half of the goods sold on its website -- must use the Amazon Prime delivery services or pay for FedEx's more expensive Express service amid reports that the world's biggest retailer is unhappy with FedEx's delivery performance. The move to block FedEx follows a spat between the two groups over the summer that saw the group end its ground delivery and air express contracts with Amazon as it moved to create a new "delivery service partners" network to improve local delivery activity.

FedEx shares were marked 0.11% lower in early trading Tuesday to change hands at $164.01 each. Amazon shares, meanwhile, were 0.94%  from last night's close at $1,785.84.

FedEx will publish its fiscal second quarter earnings after the close of trading Tuesday, with analysts looking for a bottom line of $2.78 per share on revenues of $17.7 billion.

"We cannot help but wonder whether the news is symptomatic of broader delivery issues that  Amazon’s own network might be facing as we  approach the final days of what is an already compressed peak season – particularly given the added constraints of one-day shipping and fewer external carrier options (non-renewal of FedEx Express/Ground contracts)" said Credit Suisse analyst Allison Landry. 

"While weather was partly responsible for delays during Cyber week for most carriers, Amazon also cited high demand/record orders as resulting in longer than normal delivery times based on constrained fulfillment and delivery capacity in certain areas."