UPS's Revenue Jumps 21% on Online Shopping Surge--3rd Update
02 Février 2021 - 7:32PM
Dow Jones News
By Paul Ziobro
As United Parcel Service Inc. targets smaller customers to help
boost profits, it is also getting in deeper with the biggest
customer of them all.
Amazon.com Inc. paid the company $11.3 billion last year for
shipping services, making up 13.3% of all revenue for the year, UPS
Chief Executive Carol Tomé said Tuesday. That was up from 11.6% of
all revenue in 2019. No other customer contributes more than 10% to
UPS's top line.
UPS reported a 21% jump in fourth-quarter sales to $24.9
billion, a record for the company. Operating profit rose 26%,
helped by added shipping fees and steps to curb volume during the
peak season. UPS shares rose more than 4% as results topped
expectations.
The growing exposure to Amazon comes as Ms. Tomé, who became CEO
last June, has embraced a philosophy of "better, not bigger" at the
delivery giant. In doing so, she is focusing on squeezing more
profit out of UPS's businesses and facilities and scrutinizing
areas of lower returns. Business, and perhaps customers, that don't
make the cut may be jettisoned.
In an interview, Ms. Tomé said large customers like Amazon and
others are crucial to providing the shipping volume needed to fill,
and pay for, its vast delivery network. "With a network business,
with so much capital invested in your fixed assets, we really do
need volume," she said.
Smaller shippers, meanwhile, are important for improving profits
since those customers don't get the volume discounts of larger
shippers. UPS said volume rose more than 28% for small- and medium
sized customers in the fourth-quarter, compared with 4% for the
largest shippers in its portfolio. Combined with additional
surcharges, UPS's revenue per item shipped rose 7.8% in the
quarter, the highest increase in more than a decade.
"We also look to lean into a customer base that values the
end-to-end experience and is willing to spend more," Ms. Tomé
said.
Amazon, UPS's biggest customer, is expected to report more than
$100 billion in quarterly sales for the first time when it
discloses results after markets close Tuesday.
UPS took action to ensure its delivery network wouldn't buckle
under the stress of the holiday season with new strategies that
included holding its customers to agreed-upon shipping limits
during the season. The restrictions led to some retailers like Gap
Inc. and Nike Inc. seeing their pickups paused for a few days in
December as UPS processed record volume from those and other
merchants.
Such steps help avoid extra expenses for overtime and other
measures needed to clear bottlenecks. "We reduced what we referred
to as chaos costs," Ms. Tomé said on Tuesday's earnings call.
UPS said the moves were necessary, and they helped the company
post on-time delivery levels better than FedEx Corp. and the U.S.
Postal Service throughout the holiday season.
FedEx reported a 29% surge in shipping volumes in its Ground
unit during the quarter that ended Nov. 30. Like UPS, FedEx has
also raised prices and added fees to help manage the spike in
e-commerce packages. The Postal Service, meanwhile, struggled to
make on-time deliveries.
One of Ms. Tomé's first major changes was a recent decision to
sell the Freight business to TFI International Inc. for $800
million, which exits UPS from a competitive business with low
margins.
UPS booked a $545 million after-tax charge on the Freight sale
and a $4.9 billion noncash charge on its pension plan to reflect
low interest rates. Those moves resulted in a net loss for the
quarter of $3.26 billion, compared with a profit of $659 million a
year ago.
Excluding those items, UPS said it had adjusted profit of $2.66
a share. Analysts were looking for UPS to post per-share earnings
of $2.14 on $22.87 billion in revenue, according to FactSet.
UPS declined to provide earnings guidance for the coming year
due to uncertainty from the global pandemic. It did say it plans to
spend about $4 billion on capital expenditures and grow its
dividend, and it had no plans for share buybacks.
On e-commerce, Ms. Tomé said the company is banking that those
trends will continue in 2021. "We don't think e-commerce, as a
percentage of retail sales, will decline," she said, "which means
continued supply and demand imbalances."
Write to Paul Ziobro at Paul.Ziobro@wsj.com
(END) Dow Jones Newswires
February 02, 2021 13:17 ET (18:17 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
United Parcel Service (NYSE:UPS)
Graphique Historique de l'Action
De Juin 2024 à Juil 2024
United Parcel Service (NYSE:UPS)
Graphique Historique de l'Action
De Juil 2023 à Juil 2024