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FedEx, UPS Now Riding On The Holiday Tracks

November 23, 2015 2:49 pm
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FedEx, UPS Now Riding On The Holiday Tracks

  • As many investors would expect, FedEx Corporation (NYSE: FDX) and United Parcel Service, Inc. (NYSE: UPS) thrive during the busy holiday season.
  • Online holiday sales are expected to grow as much as 8 percent this year, eclipsing last year’s 5.8 percent.
  • Meanwhile, retailers are sitting on record high inventories and could turn some stores into e-commerce hubs to boost sales.
  • According to the Wall Street Journal, UPS is expecting its deliveries to increase 10 percent to 630 million packages between Black Friday and New Year’s Eve. Meanwhile, the US Postal Service already said that it expects to deliver 600 million packages during the same time period – an increase of 11 percent from a year ago. FedEx also expects its deliveries to increase 12 percent from a year ago to 317 million.

    Related Link: The One Retail ETF That Isn’t Disappointing

    Holiday Propulsion In Shipping Space

    The shipping companies are likely to see a surge in activity from e-commerce companies, as consumers continue embracing online sales rather than facing the crowds at malls.

    One of the busiest online retailers this holiday season will be Amazon.com, Inc. (NASDAQ: AMZN), as the company is expecting its fourth-quarter sales to grow between 14 percent and 25 percent. In fact, the National Retail Federation (NRF) is expecting online sales to grow as much as 8 percent this year, eclipsing last year’s 5.8 percent gain.

    Flat Retail Sales Ahead

    The NRF also added that it is expecting flat retail sales overall, causing some retail investors to worry, as companies such as Macy’s, Inc. (NYSE: M) are seeing their inventories trend higher.

    Barclays’ Joan Payson pointed out following Macy’s third-quarter report that its inventories rose 4.6 percent during the quarter – likely forcing the company to plan liquidations in the fourth quarter, perhaps at a lower margin profile.

    Clicks Versus Bricks: E-Commerce May Be King

    The Wall Street Journal was quick to point out that many stores will look to double as a central inventory hub and liquidate its merchandise “to be picked up by a delivery man for shipment to an online shopper.”

    In fact, the Wall Street Journal suggested that retailers are also turning toward delivery services to help manage their inventory. The publication detailed that some retailers are now stocking less items in store and can order additional items (from online distribution centers) for just-in-time restocking since UPS and FedEx offer speedy delivery options.

    “Ultimately the long term play is if you get better use of inventory, you don’t have to carry as much inventory,” Steve Osburn, a supply chain consultant with Kurt Salmon told the Wall Street Journal.

    Image Credit: Public Domain

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