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Brooke Sutherland

Pandemic Rebalances the Scales for FedEx and UPS

The accelerated shift toward e-commerce and changes in perception about the value of the companies’ services look likely to be permanent.

Pricing power returns.

Pricing power returns.

Photographer: Johan Nilsson/AFP/Getty Images

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In May, I argued that the pandemic-driven boom in online shopping might mark a turning point toward perpetually lower profitability for United Parcel Service Inc. and FedEx Corp. UPS had just reported its the lowest adjusted operating margin for its domestic business in at least 15 years, as a huge shift toward more costly residential deliveries appeared to catch it unprepared. FedEx had been mired in a seemingly never-ending cycle of disappointments. But I was wrong. It seems the pandemic was actually the best thing that could have ever happened to the package-delivery companies, at least from the perspective of their business models and their long-suffering investors.