UPS to apply surcharges to residential packages after costs surge

Tue Feb 3, 2015 9:35am EST
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

(Reuters) - United Parcel Service Inc UPS.N said on Tuesday it will start applying surcharges for residential packages this year after its costs soared during the recent disappointing holiday season.

UPS also reported that fourth-quarter profit fell from a year ago but forecast earnings within the range of estimates.

UPS, the world's largest package delivery company, warned in late January it would report a fourth-quarter profit below its forecast and market expectations.

The Atlanta-based company had mobilized more workers and equipment for an anticipated surge in holiday packages, but the extra business failed to materialize. The additional costs primarily affected the company's domestic ground package unit.

As a result of the poor quarter, UPS Chief Executive Officer David Abney said on a conference call that the company would apply surcharges for residential packages in particular. The additional charges will be applied over several years as contracts with major customers are renegotiated.

"These pricing strategies will be designed to ensure we are properly compensated for the value we provide," Abney said.

UPS went through a second consecutive challenging peak season. In 2013, the company was caught off-guard by a late rush of online packages that left an estimated 1.3 million parcels undelivered on Christmas Eve.

UPS spent $500 million last year on network improvements and worked closely with retail customers to prevent a repeat of the miscues in late 2013, but the rising popularity of e-commerce made forecasting volumes a moving target.

UPS forecast full-year 2015 earnings in a range of $5.05 to $5.30 per share. Analysts estimated $5.15 a share this year.   Continued...

 
An airplane is seen on the tarmac at the United Parcel Service (UPS) Regional Air Hub in Rockford, Illinois, December 9, 2014. Picture taken December 9, 2014. REUTERS/Jim Young