FedEx sees online shoppers powering holiday record

[October 23, 2012]  NEW YORK (AP) -- FedEx expects to ship a record number of packages during the holidays, thanks to shoppers' growing fondness for buying online.

The world's second-largest package delivery company expects to handle 280 million shipments between Thanksgiving and Christmas, up 13 percent from the same stretch last year.

The forecast, released Monday, comes against a background of lackluster growth in the global economy. FedEx has warned the economy is stalling and expects conditions to get worse next year. It's making big cuts in the businesses that have been the hardest hit, including its Express unit that moves top-priority shipments by air.

But the number of shipments FedEx handles at the holidays has climbed steadily along with the growth of internet purchases. The volume of packages it handles on its busiest day, which varies according to Christmas shipping deadlines, has nearly doubled since 2005.

On FedEx's busiest day this year, projected to be Dec. 10, it forecasts 19 million packages will move through its network, up 10 percent from 2011. That's in line with the increase FedEx has seen in years with normal growth rates, noted Deutsche Bank analyst Justin Yagerman. FedEx's holiday shipment growth has ranged from 4.3 percent to 18.3 percent since 2006.

Holiday shipments this year will be driven by sales of personal electronics, apparel, luxury goods and items from large internet retailers, FedEx said.

Overall holiday sales are projected to rise 4.1 percent, according to The National Retail Federation. That would be the smallest increase since 2009, but still higher than the 10-year average of 3.5 percent.

Online holiday sales will grow 16.8 percent, excluding travel purchases, according to research firm eMarketer. Online shopping accounts for about $1 in every $10 spent over the holidays.

FedEx and larger rival UPS Inc. can benefit twice when consumers shop online: They ship the gift to the receiver, and they also ship the unwanted presents that are later returned. UPS, which is based in Atlanta, hasn't yet released its holiday forecast.

FedEx moves the bulk of its cheaper, lighter weight shipments from online and catalog retailers through its SmartPost service, a partnership with the U.S. Postal Service.

FedEx SmartPost has been a huge driver of growth for the company since it was formed. Average daily package volume grew 18 percent in the fiscal first quarter ended in August, more than three times the growth rate of FedEx's overall ground shipments in the U.S.

The ground segment, which moves mostly non-priority shipments by truck, has held up despite slower growth around the globe as consumers and businesses opt for slower methods of shipping to save money.

FedEx, which is based in Memphis, Tenn., plans to hire 20,000 seasonal workers to help handle the surge -- the same as last year.

[Associated Press; By SAMANTHA BOMKAMP]

Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.