Online Shopping Means More Business For UPS

With more people shopping online, that means more packages to deliver for UPS. The company revealed that it delivered more than 712 million packages globally, a record and a 16 percent increase from the 2015 holiday period. For the full year, package volume rose 4.6 percent to 4.868 billion in 2016.

Internet Retailer reported that, despite the company’s busy year, UPS profits actually missed analysts’ expectations, causing its stock to fall on Tuesday (Jan. 31) more than 6 percent — its biggest loss in two years. Its stock continued to fall slightly on Wednesday and Thursday.

“In the U.S., we completed investments that enabled our network to respond with on-time service, even with this record-setting volume. However, during the quarter, we experienced a significant shift in mix toward lower-revenue products. This, combined with the cost of facility investments yet to come online, weighed on our Q4 results,” CEO David Abney told analysts during the earnings call.

Shipments to consumers, which often are lower-revenue products than business-to-business parcels, increased 11.5 percent in the last quarter of 2016 and accounted for 55 percent of UPS volume in that period.

The profit loss is also due to the company implementing new technology to work towards automating more of its sorting centers and other buildings. It is currently in the midst of a five-year plan to accomplish this, with company executives noting UPS will spend about $4 billion in 2017 to keep pace with demand, an increase from $3 billion or less in recent years.

While eCommerce has led to more business for package delivery companies like UPS, it also has its share of challenges. Moving the volume of packages in a timely, efficient and cost-effective manner is something UPS is still trying to figure out. But the company is confident that this past year is a sign for positive changes ahead.

“We also delivered to an additional 2.5 million new addresses this quarter,” said Richard Peretz, UPS’ chief financial officer. “These UPS records demonstrate the expanding reach of eCommerce, which comes with great opportunities and some challenges.”


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