DALLAS - UPS (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 that 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 that it delivered
a record 31 million packages on 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
United Parcel Service Co. said Friday
that 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.
Shares fell $1.59, or 1.6 percent, to $98.90 in afternoon trading.