UPS Profits Rise on E-Commerce Growth -- Update
29 Juillet 2016 - 8:09PM
Dow Jones News
By Laura Stevens
United Parcel Service Inc. on Friday reported a 3.2% increase in
profit fueled in part by e-commerce growth, but the delivery giant
cautioned that a weaker industrial environment will continue to be
a drag.
Revenue increased 3.8% to $14.63 billion for the second quarter,
while profit rose to $1.27 billion. UPS forecast its e-commerce
business will grow faster than expected through the end of the
year, as U.S. consumers continue to show strength.
"In our domestic side, we've expanded our margins even though
the economy isn't as good as we would like for it to be," Chief
Executive David Abney said in an interview. "But we have realized
that the key to us is not what the economy may hand to us or may
blow against us, but it's a lot more about staying focused on our
strategies."
The results show that the company's efforts to improve
profitability in the higher-cost e-commerce delivery segment are
starting to pay off. But the strength in e-commerce and consumer
spending was countered by slowing exports due to the greenback's
strength and an inventory overhang among industrial customers,
which is hurting business-to-business shipments, UPS' traditional
stronghold.
Delivering e-commerce packages tend to be more expensive due to
the scattered nature of the residential deliveries and UPS has
undertaken several initiatives to produce better returns. It has
raised prices across the board, with specific increases targeted at
bigger and bulkier packages that fill up trucks and take more time
to deliver. The company also has been working to pool more consumer
deliveries, adding retail locations and lockers for pickups.
Its proprietary-routing software, Orion, has helped it to shave
minutes and miles off drivers' routes. Second-quarter delivery
stops grew by more than 3%, but the company reduced its miles
driven by a fraction of a percent and kept the cost per piece down.
UPS plans to expand the roll out of the technology so that it is
ready for the all-important holiday season.
Operating profits in the company's U.S. business increased 2.7%
to $1.23 billion.
Mr. Abney deflected a question from an analyst on the threat of
Amazon.com Inc. in taking on more of its own logistics operations
and deliveries. He said UPS' large customer base means it will
always have more deliveries to more addresses, which in turn allows
it to have lower prices and better reliability.
Cross-border and export shipment growth in Europe helped fuel
the company's international results. Shipments from Europe to the
U.S. alone grew at a double-digit pace in the quarter. Operating
profit at its international division grew 11.1% to $613 million on
nearly flat revenues. UPS has been expanding in Europe and other
international markets, and executives said that they would be
keeping an eye out for potential acquisitions in emerging
markets.
The company maintained its earnings guidance for the year but
cautioned that the third quarter would face difficult comparisons
due in part to one less operating day.
Write to Laura Stevens at laura.stevens@wsj.com
(END) Dow Jones Newswires
July 29, 2016 13:54 ET (17:54 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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