UPS boosted by online shopping, but higher costs weigh down profits

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America’s addiction to online shopping continued to power sales growth at US package delivery and logistics company UPS during the third quarter. However, questions remain about whether the Atlanta-based group can preserve profits amid rising delivery costs, which ate into its bottom line during the period.

For the three months to end of September, revenue was up 7 per cent at $15.97bn, handily topping expectations for $15.61bn as UPS shipped and delivered ever more packages and raised some of its prices for customers to offset higher fuel costs.

However, net income dipped 0.5 per cent to $1.26bn, hit by operating expenses, which rose 8.1 per cent to $13.9bn during the period.

The challenges and opportunities that the rise of online shopping are presenting to UPS is underscored by the company’s all-important US business. The division, UPS’s largest, reported a near 4 per cent jump in revenue to $9.64bn during the quarter thanks to the surge in ecommerce-related deliveries. Operating profit fell 0.5 per cent to $1.18bn as the company spent nearly $40m to build new facilities and finance Saturday delivery services to handle the rise in home deliveries.

UPS also had to incur costs related to Hurricane Harvey and Irma, which slowed regional economic activity and damaged infrastructure, shavingsome $50m off operating profit.

“The US consumer increasingly prefers to shop online and UPS is benefiting from this trend,” said UPS.

UPS’s international business also had a strong quarter, with revenue up 11 per cent to $3.3bn amid increased demand for cross-border shipments. Its supply chain and freight delivery unit saw sales rise to $2.96bn, from the $2.61bn reported in the prior-year period.’

Shares in UPS, up nearly 11 per cent over the past 12 months, dipped 0.3 per cent in pre-market trading.