Holiday Online Sales Boost UPS
February 03 2016 - 3:02AM
Dow Jones News
(FROM THE WALL STREET JOURNAL 2/3/16)
By Laura Stevens
United Parcel Service Inc. reported profit nearly tripled in the
fourth quarter, exceeding Wall Street expectations, as more
customers shipped via air and higher prices and cost-saving efforts
paid off during its all-important holiday season.
The delivery giant also gave an upbeat earnings forecast for
2016 on strong e-commerce demand even as industrial production
falls in key countries amid a weaker global economic outlook.
UPS set out this past holiday to prove to investors it can
balance costs with late-year surges in e-commerce volume --
deliveries to consumers accounted for about 60% of all U.S.
deliveries in December, up from about 45% in the third quarter.
Despite peak holiday volumes coming in slightly under forecast,
UPS posted earnings of $1.33 billion, or $1.48 a share, up from
$453 million, or 49 cents a share, a year earlier. UPS missed
earnings expectations the previous two holidays, first because it
wasn't able to deliver all its packages on time, and then because
it over prepared for volume that came in unevenly. Both those years
it overspent by $200 million.
The company said it lowered costs by shifting more than 35% of
its SurePost package deliveries -- typically delivered to the door
by the U.S. Postal Service -- back into its own network to increase
the number of packages a driver delivers at each stop. Other
initiatives also started to pay off, including driver-routing
software Orion, now 70% installed, and the introduction of Access
Point locations where customers can pick up their packages. Just a
10% increase in packages per stop creates about $200 million in
operating profit improvement, Chief Commercial Officer Alan
Gershenhorn told analysts Tuesday on an earnings call. "The things
that we're doing to our network now are going to enable us to
handle bigger and bigger peaks," he added.
UPS said it hired between 90,000 and 95,000 seasonal workers, as
expected, but brought them on later, reducing hours by 8%. Its
summer acquisition of Coyote Logistics also lowered outside
transportation costs.
Holiday volume came in lower than UPS expected, as it delivered
612 million packages between Black Friday and New Year's Eve, down
from the expected 630 million. Chief Financial Officer Richard
Peretz in an interview attributed that, in part, to more holiday
returns being shipped later than expected, in January.
Ground package volume also grew below expectations, due partly
to slowing industrial production, as well as UPS's decision to drop
some low-yield customers.
An increase in air volumes helped make up for that, as its U.S.
deferred air product grew nearly 15%, while next-day overnight
products were up 10%. Retailers were using air to ship packages
farther and faster, Mr. Peretz said, as they aim for two-day
delivery.
---
Anne Steele contributed to this article.
(END) Dow Jones Newswires
February 03, 2016 02:47 ET (07:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
United Parcel Service (NYSE:UPS)
Historical Stock Chart
From Aug 2024 to Sep 2024
United Parcel Service (NYSE:UPS)
Historical Stock Chart
From Sep 2023 to Sep 2024