UPS: Last-minute online shopping hurt 4Q profit

Published: Friday, Jan. 17, 2014 8:31 p.m. CDT

DALLAS – UPS may be forced to change the way it plans for the holiday season after December shipping problems took a bite out of fourth-quarter earnings.

The company said Friday it took “extraordinary” steps to meet holiday demand, including hiring 85,000 seasonal employees – 30,000 more than planned.

But the company’s network of brown trucks and planes was overwhelmed by what it termed “an unprecedented level” of online shopping including “a surge of last-minute orders.” Bad weather also was a factor, it said in a news release. Company officials declined interview requests.

Online shopping is good for UPS, as customers count on delivery companies to get those packages where they are supposed to go on time. But volumes were so high last month that hundreds of thousands of packages didn’t get to their destinations before Christmas – UPS hasn’t disclosed the exact number. Amazon.com offered shipping-charge refunds and a $20 credit for some customers affected by UPS delays.

On Friday, UPS said it delivered a record 31 million packages Dec. 23. That peak, however, came six days later than UPS had planned, and it was 7.5 percent more packages than the company had expected on the busiest day of the season.

Jim Corridore, an analyst with S&P Capital IQ, suggested the company learned a lesson.

“We think UPS did a poor job forecasting the holiday season, but we expect improved readiness this year as online shopping continues to grow,” he said in a note to clients. Online shopping, he added, “is a positive trend, but UPS needs to do a better job capitalizing upon it.”

Analysts think that the company could consider many changes including more staffing and higher last-minute prices to improve performance next holiday season.

UPS executives are expected to provide more details when the Atlanta-based company reports fourth-quarter results on Jan. 30.

United Parcel Service Co. said Friday fourth-quarter profit will be $1.25 per share. Analysts surveyed by FactSet had been expecting $1.43 per share. The company lowered its forecast of full-year, 2013 profit to $4.57 per share after previously predicting $4.65 to $4.85 per share. It stood by its 2014 outlook that earnings per share will grow between 10 percent and 15 percent over last year.

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