FedEx expects to ship 17M packages on busiest day

[October 25, 2011]  NEW YORK (AP) -- FedEx Corp. said Monday it expects to ship more packages this holiday season than ever before. The volume jump will be driven by cheaper packages it moves through a partnership with the U.S. Postal Service.

The world's second-largest package delivery company expects to handle 17 million packages on its busiest day, which this year is projected to fall on Dec. 12. That's 10 percent more than its busiest day last year.

Between Thanksgiving and Christmas, FedEx Corp. expects more than 260 million shipments, a 12 percent increase from 2010.

Investors cheered the optimistic forecast, a month after FedEx Corp. said shoppers were pulling back on spending. FedEx shares rose $2.12, or 2.7 percent, to $81.46 in afternoon trading.

The number of shipments FedEx handles at this time of year has climbed steadily through the recession as holiday shoppers skip stores and have gifts shipped after buying them online. The growth is also due in large part to its SmartPost service with the U.S. Postal Service. SmartPost parcels, mostly from online and catalog retailers, move through FedEx's network but are delivered by a postal worker.

SmartPost has been a huge growth driver for FedEx since the partnership was formed. Average daily volume in the segment grew 29 percent in FedEx's fiscal first quarter, which ended Aug. 31. Shipments are being boosted as online shopping grows, giving FedEx a bigger slice of the market.

Overall, holiday shopping is expected to be up from last year, but the rate of growth is not nearly as fast as previous years. Retail sales in the U.S. are expected to grow 2.8 percent in November and December to $465.6 billion, according to the National Retail Federation, far below 2010's 5.2 percent increase. The forecast is slightly higher than the average growth rate over the last decade of 2.6 percent. About 46.7 percent of shoppers are expected to buy online, compared with 43.9 percent last year.

FedEx, based in Memphis, Tenn., plans to add about 20,000 seasonal workers to handle the surge, up from 17,000 last year.

Last month FedEx said that while it's seeing signs that the economy is slowing down, it's not predicting a recession. Still, a pullback in consumer spending prompted the company to lower its earnings expectations for the fiscal year that ends in May.

FedEx's larger rival, Atlanta-based United Parcel Service Inc., hasn't yet released peak day predictions. In a note to clients on Monday, Dahlman Rose & Co. analyst Jason Seidl said he doesn't expect holiday shipment growth at UPS to be as a robust as FedEx, because it doesn't have a segment similar to SmartPost.

Seidl said he expects UPS to be more cautiously optimistic about its business and the economy in general when it reports third-quarter financial results Tuesday.

UPS shares rose 68 cents in afternoon trading to $70.74.

[Associated Press; By SAMANTHA BOMKAMP]

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