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Dive Brief:
- UPS expects package volumes to peak later in the month of December compared to 2021, as consumers shift closer to pre-pandemic behaviors by shopping later in the season, CEO Carol Tomé said on an earnings call Tuesday.
- The company also anticipates its volumes will grow at a slightly lower rate from Q3 to Q4 compared to last year, as top customer Amazon delivers more of its own orders, Tomé said. The shift is expected to free up capacity in the company's network for other shippers.
- "It gives us room to invite additional customers into our network and give them great service during peak, which we are doing," Tomé said of the contractual agreement UPS and Amazon reached regarding delivery volumes.
Dive Insight:
Last year was an unusual holiday season for parcel carriers, as supply chain snags, tight inventory levels and consumers ordering earlier led to softer demand during the traditional peak shipping stretch than expected.
"Everyone was saying, 'Shop early, shop early, shop early,'" Tomé said.
UPS is planning for a more typical peak this year, as low inventories and upstream congestion are no longer a concern. The company says it has deep insight into demand trends, as it collaborates closely with large shippers ahead of and during peak to prepare its network for the holiday surge in shipments.
"We expect the peak to be a little bit later and we're ready for it," CFO Brian Newman said.
Carriers have faced softening global demand ahead of the holidays, as businesses adjust to inflationary pressures and inventory glut. UPS rival FedEx rolled out a $2.7 billion cost savings plan last month after encountering a decline in package volume and lower-than-expected revenues in its Express and Ground units
Experts and analysts say UPS has executed at a higher level than FedEx as of late. In their most recently reported quarters, FedEx's net income fell 21%, while UPS' net income grew 10.9%. UPS also reaffirmed its full year financial targets.
“Even at the same price hike level, UPS can hold up better than FedEx despite FedEx's recent warning about overall volume growth slowing," Anthony DeRuijter, an analyst at Third Bridge, said in emailed remarks. "Our experts say that UPS is hitting FedEx hard in its Ground segment. It has better and faster execution on network infrastructure initiatives, and there’s a focus on the SMB customer where returns on volumes range from 20-40%.”
Tomé said UPS quickly responded to a softening global economy, adjusting its network to match volume levels and focusing on growth in more profitable customer segments. Although average daily volume fell 2.1% year over year for UPS in Q3, its revenue per package grew 8.6%.
UPS is evolving its approach as it continues to see strong results under Tome's "better, not bigger" profit-growing strategy.
"We are focused on controlling what we can control, and under our 'better and bolder' framework, we are combining digital capabilities with our global integrated network to continue winning in the most attractive parts of the market, driving operational excellence and delivering best-in-class service for our customers," Tomé said.
via https://www.aiupnow.com
Max Garland, Khareem Sudlow
