FedEx Corp. (FDX) projected a 13 percent gain in shipments during the peak season between the U.S. Thanksgiving holiday and Christmas, driven by less-expensive services that are popular with online retailers.
Deliveries in the period may top 280 million, the company said today in a statement. Business-to-consumer shipments such as online purchases during the holidays have become increasingly important to FedEx as a slowing economy hurts the market for high-value overnight shipments between companies.
Cheaper offerings such as SmartPost, where the U.S. Postal Service makes the final delivery, and ground delivery will lead FedEx’s gains, Mike Glenn, executive vice president of market development, said today. Online merchants use the low-cost services, then promote free or discounted shipping to entice consumers to spend more.
“SmartPost fits in the sweet spot of e-commerce,” Glenn said. “E-tailers like it a lot because it fits well with their free shipping promotions because it’s a low-cost service.”
FedEx predicted a peak of 19 million shipments on Dec. 10, which would be a 10 percent gain from last year’s most active day and the busiest in the Memphis, Tennessee-based company’s history.
The projected increases are included in FedEx’s annual profit forecast, which the company lowered Sept. 18 to no more than $6.60 a share from a previous range of $6.90 to $7.40.
FedEx fell 0.7 percent to $91.48 at the close in New York. The shares have gained 9.5 percent this year.
While the holiday period is important, expectations are already set after FedEx lowered its earnings forecast, said Art Hatfield, an analyst at Raymond James & Associates in Memphis.
“The only way you’ll get meaningful change is if the economy does materially better or worse than we expect, and that’s not likely to happen at this point,” Hatfield said.
FedEx plans to hire 20,000 seasonal workers, the same as last year, to limit costs as it revamps its Express unit to boost profits by $1.7 billion over three years. The overhaul includes job reductions and getting rid of fuel-guzzling planes.
United Parcel Service Inc. (UPS), the world’s largest package- delivery firm, hasn’t yet provided a holiday forecast.
Last year, FedEx forecast it would handle 260 million shipments over the peak season, and the actual volume processed during that period was 247 million.
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