FedEx Sees Record Holiday Shipments on Rising Retail Sales

By Nick Carey

CHICAGO -- Package delivery company FedEx (FDX) said Monday that it expects to see a record number of shipments during this year's busy holiday season, driven by rising retail sales and a jump in e-commerce.

The Memphis-based company said it expects to handle 317 million shipments between Black Friday, traditionally the busiest U.S. shopping day of the year, and Christmas Eve, an increase of 12.4 percent over the previous year.

"Each year we face a challenge that's greater and that's driven by e-commerce," Patrick Fitzgerald, FedEx senior vice president for integrated marketing and communications told Reuters. "We've learned that planning and preparation is key."

The National Retail Federation has predicted retail sales in November and December -- excluding automobiles, fuel and restaurant sales -- will increase 3.7 percent to $630.5 billion after a 4.1 percent increase last year. The NRF said online retail sales could increase up to 8 percent, to as much as $105 billion.

%VIRTUAL-WSSCourseInline-884%FedEx said that it expects to see three spikes in package volumes during peak season, on Cyber Monday and the first two Mondays in December. The company said its holiday projections are included in its full-year fiscal 2016 earnings guidance of between $10.40 and $10.90 a share.

The rapid rise of e-commerce poses challenges for retailers and package delivery companies alike. In 2013 bad weather and a late surge in online retail packages caught FedEx and main rival United Parcel Service (UPS) off guard, leaving an estimated 2 million packages undelivered on Christmas Eve, the majority in UPS' network.

Last year both companies touted investments in their networks and close collaboration with major retailers to manage package flows during the holidays. UPS ended up over-spending to prepare for package volume spikes that didn't materialize, hurting its fourth-quarter earnings. FedEx didn't report any problems.

This year FedEx has invested $1.6 billion in capacity and automation projects at FedEx Ground to help with peak season.

FedEx's Fitzgerald said that if retailers come in way above forecast with a sudden surge in packages, the company may "need to cap volumes" in order to protect its network.