UPS expects to ship 8% more packages during the holiday season peak
Its Q3 revenue grew 3.4%, thanks partly to U.S. e-commerce.
Shipping carrier United Parcel Service of America Inc. anticipates this year’s holiday season will be its biggest yet, with five days of shipping volumes higher than that on its busiest day in in the fourth quarter of 2012.
UPS made the prediction today as it reported its third quarter results. UPS said revenue increased 3.4% year over year in the third quarter, to $13.52 billion from $13.07 billion in Q3 2012. Domestic revenue increased 5.0%, to $8.25 million from $7.86 million in Q3 2012.
U.S. e-commerce drove that growth, along with shipments exported from Europe, which were up nearly 10% year over year, UPS says. In the third quarter, the carrier delivered 2.3% more packages domestically year over year, thanks to a 5% increase in business-to-consumer shipments and growth in business-to-business shipments as well, primarily from retailers, UPS’ chief financial officer Kurt Kuehn told investors in an earnings call this morning. He did not give an exact figure for B2B growth. UPS also delivered 6.3% more packages domestically in countries outside of the United States than it did in the same period last year.
For the upcoming holidays, UPS predicts that online sales will increase 13% to 15%, helping to boost its shipping package volume by 3% to 5% during the holidays, Alan Gershenhorn, senior vice president of worldwide sales, marketing and strategy, said during the call. The company also expects its daily shipping volume to be up by 8% year over year on average during the busiest days of the season, and that it will ship 34 million packages globally on its peak day, predicted to be Dec. 16. Last year, UPS’ peak day was Dec. 20, when it shipped more than 28 million packages worldwide.
For the three months ended Sept. 30, UPS also reports:
- Operating profit from U.S. domestic packages increased 15.7%, to $1.186 billion from $1.025 billion in Q3 2012.
- U.S. domestic package revenue from Next Day Air deliveries grew 1.1%, to $1.595 billion from $1.577 billion in Q3 2012. However, UPS delivered 3.2% fewer Next Day Air packages on average per day (1.22 million) in the third quarter than in the same period last year (1.26 million). Kuehn attributed that partly to retailers moving their fulfillment centers closer to customers, then relying more heavily on UPS ground rather than air shipments. Average revenue per piece for Next Day Air packages was $20.39.
- U.S. Deferred package revenue was up 1.8% to $790 million from $776 million in Q3 2012. UPS delivered 2.3%more Deferred packages on average per day (952,000) in the third quarter than in the same period last year (931,000), with average revenue per piece of $12.97. Deferred packages are air shipments that are not guaranteed to arrive the next day.
- U.S. Ground package revenue was up 6.6% to $5.869 billion from $5.508 billion in Q3 2012. UPS delivered 2.7% more Ground packages on average per day (11.3 million) in the third quarter than in the same period last year (11.0 million), with average revenue per piece of $8.09.
In the third quarter, UPS also expanded its retail operations in Northern Mexico, helping bring manufactured goods from that country into the United States more easily, the company says.
For the year to date, UPS reports:
- Total revenue of $40.62 billion, up 2.7% from $39.56 billion in the same period last year.
- Domestic revenue of $24.77 billion, up 3.6% from $23.92 billion in the same period last year.
- Operating profit from U.S. domestic packages of $3.40 billion, an increase of 50.4% from $2.26 billion in the first nine months of 2012.
- U.S. domestic package revenue from Next Day Air of $4.75 billion, an increase of 0.2% from $4.74 billion in the same period last year.
- U.S. Deferred package revenue of $2.40 billion, which remained flat from the same period last year.
- U.S. Ground package revenue of $17.61 billion, an increase of 4.9% $16.78 billion in the same period last year.
UPS ranks first among shipping carriers in Internet Retailer’s Leading Vendors to the Top 1000 E-Retailers guide. 161 retailers in the Top 500 and 251in the Second 500 use UPS.