Brief

FedEx foresees record holiday shipments driven by e-commerce growth

Dive Brief:

  • FedEx told industry analysts this week that the company expects a record number of shipments during the holiday season for the second straight year, driven by holiday promotions and consumer buying patterns. In response, the shipper plans to hire about 50,000 seasonal employees for the holidays, roughly the same as last year.

  • "The rapid growth of e-commerce has driven significant shifts in demand over the last several years. Last year, we experienced 15% growth in peak season volume and delivered more than 325 million packages," T. Michael Glenn, FedEx's executive vice president of market development and corporate communications, told analysts according to Seeking Alpha's transcript. "Holiday promotions and buying patterns have increasingly shifted, which has resulted in heavy demand for package delivery on Mondays during the peak. The intensity for demand on Monday has accelerated in recent years, as more and more retail locations have started serving as fulfillment centers for e-commerce orders. We expect each of the four Mondays during the upcoming peak period to be among the busiest in our company's history."

  • The statements were made after FedEx reported healthy revenue of $14.7 billion and profit of $715 million for its fiscal first quarter of 2017. Revenue increased from $12.3 billion reported for same quarter last year, and profit from $692 million for the same period. Following a recent rate hike announcement by UPS, FedEx also reiterated that starting Jan. 2, 2017, FedEx Express shipping rates will increase by an average of 3.9%, while FedEx Ground, FedEx Home Delivery and FedEx Freight rates will climb an average of 4.9%.  

Dive Insight:

FedEx, like UPS, DHL and other big shippers, is navigating some interesting times. The explosive growth of e-commerce is helping to boost its revenue such that it seems like FedEx can do no wrong and simply continue to ride a revenue rocket. Yet it has to spend to keep supporting that demand, and also as competitors like Amazon are moving in.

Both FedEx and UPS have said that they plan to hire roughly the same number of seasonal employees during the upcoming holiday season as they did for the holidays last year, which, taken at face value, is not going to get a lot of people excited about potentially bountiful consumer spending this holiday season. However, FedEx went out of its way to say that in fact it’s expecting a record number of shipments during the holidays this year.

Having the same number of seasonal employees on board as last year, but predicting an exceptionally busy stretch, almost makes it sound like FedEx doesn't know what it's getting into. But the major shipping and logistics companies have been making a lot of investments in supply chain, warehouse and route management of late that can save them operational dollars over time, so maybe FedEx knows it can handle a record season without adding a much higher number of seasonal jobs. (At least, we hope for their sake and for the sake of people that will order last-minute Christmas gifts that this is the case.)

FedEx also raised its earnings outlook moving forward, and in general its earnings report was seen as positive news for the broader economy, as many analysts see both FedEX and UPS as bellwethers of overall economic health in the U.S.

Filed Under: Technology Logistics Corporate News
Top image credit: Thomas R Machnitzki