(Reuters) - FedEx Corp (FDX.N) expects a 12 percent jump in holiday shipments this year and will add about 20,000 workers to handle the record volume driven by online shopping.
The surge is driven by a combination of gradual economic improvement and ever-increasing Internet sales, analysts said.
“This is slightly better than we anticipated,” and suggests some restocking by retailers as well as more online shopping by consumers, said Dahlman Rose & Co. analyst Jason Seidl.
“The economy right now is not as bad as some people had feared, though I wouldn’t say it’s going great guns, and this is also an indication that a lot of retailers kept inventories low and the consumer is not totally in the dumps,” he added.
FedEx shares were up 3.5 percent on Monday after the company detailed its holiday expectations.
Retailers and manufacturers have been keeping inventories lean because of low consumer confidence. Demand that develops closer to the holidays this year now will most likely be delivered by FedEx and United Parcel Service (UPS.N), which offer fast shipment options.
FedEx said it will add about 20,000 seasonal workers to help handle the volume surge, up from 17,000 last year.
“Peak season” shipping, in which goods are moved here from Asia in the fall for the holidays, was dulled this year because companies are not keeping excess goods on their shelves due to the sour mood of the consumer.
U.S. gross domestic product grew at an annual rate of 1.3 percent in the second quarter, underscoring the tepid pace of economic recovery.
FedEx’s forecast “is a combination of maybe the economy is a little better than we thought, and that this really speaks to the growth of on-line shopping,” said BB&T Capital Markets analyst Kevin Sterling.
“Inventories are extremely lean, so any pulse of demand has got to come by airfreight, and that’s right in the wheelhouse for FedEx and UPS,” said Sterling, based in Richmond, Virginia.
And e-commerce is showing no signs of abating, which plays into the hands of FedEx and UPS, the two largest package delivery companies, which move goods faster than ship or rail.
“The buzzword this year is M-commerce, or mobile commerce,” in which convenience-seeking consumers order products via their mobile phones, further boosting online sales, Sterling added.
FedEx said it delivers 61 percent of its packages in two days or less, for example.
FedEx expects to deliver more than 260 million packages globally between Thanksgiving and Christmas, up 12 percent from a year earlier.
Apparel, consumer electronics, luxury goods, books and other items from big Internet retailers will account for a large portion of holiday volume, the company said on Monday.
FedEx expects to move more than 17 million packages on December 12, the projected busiest day in company history, more than double its average daily deliveries.
That would top last year’s record 15.6 million shipments on December 13. As recently as 2005, the Memphis, Tennessee-based company’s peak shipping day was below 10 million packages.
In its forecast, FedEx cited a National Retail Federation estimate that holiday sales in November and December will rise 2.8 percent from 2010 to $465.6 billion, surpassing the average increase of 2.6 percent over the last 10 years. It also noted various forecasts for rising Internet sales this year.
One beneficiary will be the beleaguered U.S. Postal Service, which partners with FedEx for FedEx SmartPost deliveries.
With SmartPost, FedEx delivers to post offices, which in turn make final delivery to residential customers.
“As e-commerce continues to grow and demand increases with more customers shopping and conducting their business online, FedEx SmartPost is poised to handle the increase in shipments,” FedEx Chief Executive Frederick Smith said in a statement.
FedEx shares were up 3.5 percent in midday trading at $82.16.
Reporting by Lynn Adler in New York; editing by John Wallace, Dave Zimmerman