*Shippers Report Holiday Volume Showing Impact of Slowing Economy

United Parcel Service, Atlanta, and FedEx Corp., Memphis, TN, reported softening volumes yesterday as a result of slowing across the U.S. economy.

UPS said that although the busiest days of the peak season are still ahead, domestic volume levels for the two-week period that ended Dec. 8 were flat compared with 1999 due to slowing customer shipments. This follows a slowing in domestic volume increases in October and November to 4 percent, compared with the 5.5 percent growth reported for the first nine months of the year.

Earlier this year, UPS said it expected a slight slowdown in the rate of fourth-quarter growth because of one fewer shipping day, a softening economy and comparison with strong results posted a year ago. The unusual slowing in holiday shipments has compounded the situation, although UPS' integrated network allows it to adjust to changing economic conditions. The company now expects earnings-per-share growth of 7 percent to 10 percent for the fourth quarter.

FedEx also said it is experiencing a softening in volumes, and domestic growth rates at FedEx Express and FedEx Ground are expected to be flat to slightly down for December.

Despite the slowdown, both companies expect to achieve their full-year 2000 performance targets.

“Going forward, we see opportunities in all our businesses,” said UPS chairman/CEO Jim Kelly. “Our focus is on profitable growth, which we believe is attainable even if the U.S. economy continues to slow. We anticipate slight declines in the growth rate for the U.S. domestic business, strong volume growth across international operations and revenue growth of 30-plus percent in our logistics business.

“Barring further economic slowing, we expect to achieve the targets we set for 2001 — 10 percent revenue growth and earnings-per-share growth in the midteens.”

FedEx also announced that it expects to post earnings of 67 cents per diluted share for the second quarter, which ended Nov. 30, up 18 percent from 57 cents per share last year.

FedEx will release a full earnings report Wednesday.

“FedEx Corp. delivered solid increases in operating and net income in the second quarter,” said Alan B. Graf Jr., FedEx chief financial officer. “The increases were driven by strong package yield improvements at FedEx Express as well as volume and yield growth at FedEx Ground. Both companies continue to do an exceptional job of increasing productivity and reducing expenses.”

Graf said the fastest-growing part of the business remains FedEx International Priority shipments for the second quarter, and the company expects its international priority shipments to grow 10 percent to 12 percent in the fiscal third quarter.

However, he said, “We are seeing some softening in our Asian outbound volumes. Even with this slowing, we strongly believe that FedEx continues to grow market share in the fast-growing Asian markets and remains the leader in international express transportation of exports from the United States.”

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