UPS provides rosy outlook ahead of $1 trillion holiday shopping season
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Consumers are feeling dour, but they're still expected to spend record sums this holiday season — with higher prices pulling much of the sled.
Why it matters: The National Retail Federation and Bain & Co. recently projected separately that Americans will spend more than $1 trillion during the holiday shopping season for the first time.
The latest: United Parcel Service raised its earnings outlook on Tuesday, citing the holidays as a significant factor driving its confidence, despite rock-bottom consumer sentiment.
- Online retail sales — which power UPS' business this time of year — are expected to rise by 9% based on an average of industry forecasts, according to UPS.
- "U.S. consumers remain resilient and the outlook for holiday demand is strong," UPS CEO Carol Tomé said on an earnings call.
The impact: UPS shares surged 5.2% in mid-afternoon trading.
The big picture: Overall U.S. retail sales are expected to rise by 4.5% in 2026, topping 2025's 3.5% increase, according to Bain & Co. projections.
- NRF projected a 4.2% increase, which would be the highest increase since the pandemic.
- Bain cites "consumer resilience," the strong stock market, higher tax refunds and retail price cuts as positive factors for the holiday shopping season.
Yes, but: Higher spending doesn't necessarily mean consumers are buying more. Inflation is expected to be a major driver of holiday sales growth, according to Bain.
- The firm projects that higher prices will account for all of the sales growth at sporting goods, hobby, book and music stores.
- Inflation is also expected to prop up sales at department stores and furniture and home furnishings retailers, even as they sell fewer items.
UPS expects average daily package volume to jump 25% from the third to the fourth quarter, roughly matching last year's holiday surge, based on forecasts from its largest customers, Tomé said.
- Year over year, however, UPS expects volume to fall 1.3% in the fourth quarter — largely because the company cut its Amazon shipment deal to boost its profitability.
What we're watching: Elevated gas prices could still turn holiday shoppers into Scrooge.
- The average price of gas was $4.27 per gallon on Tuesday, up 40% from a year ago, according to AAA.
- Every 1-cent increase in the price of gas costs U.S. drivers more than $3.7 million per day.
The bottom line: Consumers aren't feeling particularly merry, but it's not stopping them from gift-giving.
