Mondays might feel a lot different this holiday season, at least for FedEx Corp. delivery drivers.
The fast growth of e-commerce and the shift it creates in demand for delivery services will again affect the peak holiday season. Last year during peak season, FedEx delivered more than 350 million packages, and the 2016 holiday season is expected to drive another record peak shipping season, T. Michael Glenn, president and CEO of FedEx Services, told analysts this week during FedEx’s earnings call for the fiscal first quarter 2017 ended Aug. 31.
FedEx is listed as the shipping carrier for 313 Top 1000 clients, behind United Parcel Service Inc., which is the shipping carrier for 421 in the Top 1000, according to the 2017 Leading Vendors to the Top 1000.
“Holiday promotions and buying patterns have increasingly shifted, which has resulted in heavy demand for package delivery on Mondays during the peak,” Glenn said, according to a Seeking Alpha transcript. “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 shipping company says it is ready to handle the onslaught of e-commerce deliveries. “We’ve added 19 automated stations in four major distribution centers for FedEx Ground since the peak season last year alone. We’ve also added more reliable and efficient aircraft to the FedEx Express fleet over the last year,” Glenn said. FedEx expects to hire 50,000 seasonal workers, many of whom will have a shot at full-time employment because of increased demand and network expansion, he said.
FedEx Express will deliver on Christmas Eve, a Saturday, but FedEx Ground will not operate that day, Glenn said. FedEx Hold at Location, which offers package pickup at more than 2,400 FedEx locations, including more than 1,800 FedEx Office retail stores, will be a delivery option for customers on Dec. 24.
FedEx’s $4.8 billion purchase of Holland-based TNT Express NV in May is helping FedEx expand its global transportation portfolio and e-commerce capabilities, FedEx says. “Our objective is to build out a robust portfolio of services in Europe and other countries just as we have in the U.S. to include a choice for e-commerce customers in terms of getting their packages delivered in a reliable and efficient manner,” Glenn said. “That’s going to be a significant focus for us as we integrate TNT.”
For the quarter, FedEx reports average daily package volume grew 1.3% to 4.087 million from 4.036 million in Q1 fiscal 2016. U.S. domestic package volume was 2.649 million up 1.3% from 2.616 million a year ago.
After the holidays, FedEx will raise rates. Effective Jan. 2, FedEx Express rates will increase an average of 3.9%, while rates for FedEx Ground and FedEx Freight will increase an average of 4.9%.
A “significant increase” in heavier and oversized residential e-commerce packages—flat-screen televisions, mattresses, trampolines—are forcing the carrier to adapt some of its ground shipping facilities, FedEx says. On June 1, FedEx made more packages subject to a $10.50 handling surcharge—the fee kicks in on items longer than 48 inches; the previous size threshold was 60 inches.
“These packages create some operational challenges for us. For instance, they don’t always fit on our standard sortation equipment and they take up more space in line haul and delivery vehicles in addition to being more difficult to handle,” says Henry Maier, president and CEO of FedEx Ground.
FedEx is using six temporary annex buildings across the country to handle packages that do not fit its automated conveyor and sortation systems, Maier told analysts.
For the fiscal first quarter of 2017 ended Aug. 31, FedEx reported:
- Total revenue of $14.66 billion, up 19.4% from $12.28 billion in the same period last year.
- FedEx Ground revenue of $4.29 billion, up 12.0% from $3.83 billion.
- Revenue from its FedEx Express segment of $6.66 billion, up 1.1% from $6.59 billion.
- Net income of $715.0 million compared with $692 million.