Shoppers were willing to spend this holiday season, particularly online, UPS executives said Tuesday. That shows the U.S. economy is getting better, even as the economies of Europe and the rest of the world continue to struggle.
"What we're seeing is a good, stable improvement in the economy," UPS chief financial officer Kurt Kuehn said. "We're certainly more confident in the U.S. economy than we were a few months ago."
For the first time, Kuehn said, more than half of the Sandy Springs logistics company's end-of-year shipments were from businesses to customers. Traditionally, the bulk of UPS' shipments are from one business to another.
UPS shipments from online sales at the holidays were up 15 percent, Kuehn said, while traditional retail sales increased 4.1 percent, according to the National Retail Federation.
The changes still don't amount to a robust economy, UPS CEO Scott Davis said in a company conference call, but Kuehn said in the call that the company was "pleasantly surprised" by the relative strength over the holidays. The fourth quarter is becoming increasingly important to UPS, he said.
John Barnes, managing director for RBC Capital Markets, said UPS has the opportunity to continue profiting from increased e-commerce, as customers become used to shopping online and large retailers struggle or go out of business.
"They've only scratched the surface," he said.
The average weight of the items UPS shipped dropped in 2011, as average daily volume rose. Traditionally, a decrease in average weights is a troubling sign for the economy, but both Barnes and Kuehn said the shift comes as a result of increased online shopping -- where people buy lighter items than they might in a store -- and continued shrinking of technology, leading to smaller items.
David Ross, and analyst for Stifel Nicolaus, said if UPS prices the shipments appropriately, the decreased weight may not have much impact on its bottom line. Kuehn said lighter, smaller shipments mean the company can fit more packages on each truck.
Exports from Asia to the U.S. dipped 3 percent in the fourth quarter, and Kuehn said he expects to see more manufacturing in the United States.
"I do think the U.S. economy is becoming more and more competitive," he said.
UPS made $1.3 billion in the fourth quarter, a 17.2 percent increase over the $1.1 billion the company made in the fourth quarter of 2010; it made $4.3 billion in 2011, a 23.3 percent increase over 2010. The earnings include a pension accounting change.
The company expects the coming year to be strong as well, and anticipates a per-share earnings increase between 9 and 15 percent in 2012. The per-share increase in 2011 was 25 percent.
