As online shoppers grow to expect, if not require, quick and easy shipping of their purchases, logistics companies have been making investments to keep up with increasing demand.
United Parcel Service (UPS) announced recently, for one, that it will begin to make ground deliveries on Saturdays starting in April, said The Wall Street Journal. The delivery company already makes some express and air package deliveries on Saturdays. By the end of 2017, UPS reportedly aims to have rolled out Saturday ground delivery to about half of the U.S. population. UPS reportedly said that pickup and package sorting will also happen on Saturdays as a way to free up network capacity at the beginning of each week.
But keeping up with eCommerce growth comes at a cost. UPS’ increased investments in Saturday services, sorting centers and airplanes, combined with lower profits from residential deliveries and a stronger U.S. dollar, said the WSJ, have eaten into the company’s fiscal outlook. Though Q4 revenue was high, profits were down, along with long-terms sales and earnings guidance for the coming years.
“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.
UPS plans to spend some $4 billion on capital expenditures in 2017 to keep pace with eCommerce demand. In 2018 and 2019, UPS anticipates overall revenue to increase between 4 to 6 percent, down from the earlier 7 percent target. Likewise, UPS reportedly projects adjusted earnings per share to rise 5 to 10 percent, down from the 13 percent forecast in 2014.
In its Q4 earnings report, UPS revealed that the company 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.