International Express Volumes
David Ross – Stifel Nicolaus asked: Could you comment on the international express volumes by region? How much was Asia down versus Europe versus U.S.? How much capacity exactly did you take out in the quarter, specifically in the transpacific market?
David J. Bronczek – President and CEO, FedEx Express responded: Generally speaking, Asia Pacific had the lion’s share of the impact to our international volumes, around the rest of the world they held up pretty nicely.
Alan B. Graf, Jr. – EVP and CFO added: Our Europe IP actually grew year-over-year.
Nate Brochmann – William Blair & Company asked: I wanted to talk about with the e-commerce growth, whether that’s a shift maybe from other modes that might have taken place in the past or whether that’s true market share gains? Are you seeing any real change in your customers’ supply chains because of that and how you are shifting your network to take advantage of those changes?
T. Michael Glenn – EVP, Market Development and Corporate Communications responded: We have seen an increase in e-commerce sales as a percentage of total retail sales.
In the third quarter, e-commerce sales were 4.6 percent of total retail sales, which was up from 4.3 percent last year and 1 percent in 2000. There is certainly an increasing trend for more online sales, although still as a percentage of total retail sales it’s relatively small even though it’s growing at about 15 percent.
As e-commerce is becoming more popular promotional tactics like free shipping or a key part of that, our SmartPost service plays right into the hands of that and allows us to compete very effectively in the e-commerce area with SmartPost.
Our FedEx Home Delivery also forms extremely well with optional services such as appointment delivery, day definite delivery and time delivery. We are well-positioned to take advantage of this increasing trend of e-commerce sales and it certainly benefited during this peak.
Let me take one minute to correct something I said earlier.
I mentioned that FedEx Freight yields increased 5 percent absent fuel, that number is actually 4 percent. I picked up the International Priority number when I was speaking there.
FedEx Freight yields absent fuel increased 4 percent not 5 percent.
Average Pounds Per Package in Express
Kevin Sterling – BB&T Capital Markets asked: I look at your average pounds per package in Express, we saw an increase this quarter. It looks like it’s one of the highest levels in recent years. How should we think about average pounds per package in Express going forward? Is this average the new normal or is there something going on this quarter?
Bronczek responded: We had more heavier deferred traffic, heavier box deferred traffic into our mix, and of course IP and IPFS – IPFS has higher weight and helps our overall revenue.
I think a lot of focus is on IP, IPFS combined. So, I think we’re on that track going forward.