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FedEx sees holiday shipping volume rising 13 percent

By Lynn Adler

(Reuters) - FedEx Corp on Monday forecast a 13 percent annual increase in holiday shipping volume, driven by e-commerce and last-minute orders, but stuck to its view of a tepid economy that is pushing customers to pick cheaper shipping options.

The company plans to hire 20,000 seasonal workers, the same as last year, when its holiday deliveries rose 10 percent, to handle the more than 280 million shipments it expects during the season between Thanksgiving and Christmas.

"On-line shopping is here to stay regardless of economic concerns," said Kevin Sterling, BB&T Capital Markets analyst in Richmond, Virginia.

"A lot of this is going through SmartPost, a cheaper delivery option. Customers are moving to a slower mode of shipping, which drives down (FedEx's) revenue per package."

FedEx, closely watched as an indicator of consumer demand and economic health, said an increase in holiday shipments was already included in its fiscal 2013 earnings outlook.

FedEx twice this year has cut its 2013 global forecast, citing slower growth in China, recession in some European economies and high energy prices. The company also reduced its profit outlook because customers have been opting for slower and less expensive shipping options.

FedEx can add the same number of seasonal workers as last year because it has been hiring staff through 2012, especially at its Ground and SmartPost divisions, which will handle the bulk of the holiday volume, said T. Michael Glenn, executive vice president of market development and corporate communications.

The company said December 10 - so-called Green Monday - is expected to be its busiest day ever with some 19 million shipments - a 10 percent increase from last year.

E-commerce will drive the shipping volume on Green Monday, which falls on the second Monday of December and kicks off the heaviest online shopping week of the year.

Green Monday was the third heaviest shopping day after Cyber Monday and Black Friday last year -- two shopping days that follow the Thanksgiving holiday.

"Despite everything we read, the world's not ending, at least not before Christmas this year," said Jeffrey Kauffman, a managing director at Sterne Agee.

As more shoppers buy their holiday gifts on the Internet or via mobile phone, it means higher shipping volume for FedEx and United Parcel Service - both of which have delivery contracts with most of the large Internet retailers.

Delivery volumes for FedEx's busiest day of the year have consistently grown, and will be nearly double the 9.8 million shipments it handled in 2005.

FedEx has gained share of catalog and other Internet orders via SmartPost in which it delivers packages to the U.S. Postal Service, which in turn makes final delivery to residential customers, Kauffman noted.

SmartPost average daily package deliveries jumped 18 percent to 1.7 million in fiscal 2012.

U.S. retail sales are expected to rise 4.1 percent this holiday season, a slower pace than in prior years, according to the National Retail Federation.

Online holiday sales, excluding travel, are expected to increase 16.8 percent from last year to as much as $54.5 billion, FedEx said, citing eMarketer data.

"We always see a significant push for last-minute orders, and a lot of it has to do with procrastination, which for FedEx is a good thing during the holiday season," FedEx's Glenn said in an interview.

FedEx said 82 percent of its ground deliveries are shipped in three business days or less, 61 percent are delivered in 2 business days or less, and 24 percent are delivered the next business day.

"There are a lot of high-tech products out there and people are saving money in other places to spend on these goods," Glenn said. "We certainly are expecting a strong peak season for FedEx."

UPS, the largest package delivery company, could give insight into its seasonal hiring plans when it reports quarterly results on Tuesday. UPS added about 55,000 workers for the holidays last year, 10 percent more than it hired in 2010.

The company's shares declined 1.2 percent in midafternoon trading at $90.96 on the New York Stock Exchange.

(Reporting By Lynn Adler; Editing by Maureen Bavdek and Leslie Gevirtz)

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