American consumers’ love for online shopping is doing great things for United Parcel Service Inc.’s revenue. The catch is that the demand for now is outstripping the delivery company’s ability to control costs.
Sales in the U.S. package division jumped 5 percent in the first quarter, Atlanta-based UPS said in a statement Thursday. But every blender, book and bath towel takes fuel and a driver to reach someone’s front door, contributing to higher expenses that pared the unit’s operating profit by 2.4 percent.
The conundrum isn’t lost on investors, who after pushing down UPS shares as the market opened later relaxed on executives’ assurances that they’re on top of the matter. To counter rising expenses, UPS raised U.S. prices at the high end of its projected range, ultimately increasing the amount collected per package by about 2.4 percent. Investments to boost efficiency are working but will take time, the company’s boss said.
Source: UPS Is Hampered by E-Commerce Conundrum as U.S. Profit Drops