Demand for fast, online delivery drives UPS 3Q

DALLAS (AP) – UPS is doing booming business in next-day deliveries in the United States (US) while keeping costs under control, but the weakening global economy is contributing to disappointing revenue growth.

The delivery giant said yesterday that its third-quarter profit rose 16 per cent to USD1.75 billion. Revenue, however, fell short of Wall Street expectations UPS also announced that Chief Operating Officer Jim Barber will retire at the end of the year, the second departure of a senior executive in three months. The 59-year-old Barber was considered a likely successor to Chief Executive Officer (CEO) David Abney.

UPS is taking advantage of increasingly demanding consumers. In the third quarter, its volume of next-day deliveries in the US jumped 24 per cent and two-day service surged 17 per cent compared with a year ago.

“There has just been a structural change when it comes to air shipments, and big e-tailers and retailers and others are wanting to get packages to customers within 24 hours,” Abney said in an interview. The CEO noted that UPS has added nine planes this year with two more on the way to handle the growth in quick shipments.

Rival FedEx recently ended its US air shipments for Amazon.com. UPS did not break out the benefit it might have gained.

Abney instead pointed to UPS’ strategy of pursuing business with small and medium-size retailers and other businesses.

The delivery companies are heading into the most important part of the year for them, the Christmas-shopping season that starts in earnest around Thanksgiving Day. Atlanta-based UPS said it expects to handle about 32 million packages a day during the holiday peak, 50 per cent more than an average day the rest of the year.

The company plans to hire 100,000 seasonal workers to help sort and deliver the load.

UPS expects that air shipments will continue to grow during the holiday crush “as next-day delivery increasingly becomes the new standard” for retail shipments to consumers, Barber said during a call with analysts.

UPS reported third-quarter earnings excluding some one-time costs, mostly employee benefits related to restructuring, were USD2.07 per share. That was a penny better than expected, according to surveys by Zacks Investment Research and FactSet.

Workers prepare to unload a UPS aircraft after it arrived at Dallas-Fort Worth International Airport in Grapevine, Texas. PHOTO: AP