The United Parcel Service on Friday posted an increase of 3.2% in profit that was fueled in a big way by the growth of e-commerce but the giant in parcel deliveries cautioned that a weaker environment would continue to drag.
Revenue was up 3.8% to end the quarter at $14.63 billion while its profit was up to just over $1.27 billion. UPS forecast that its business for e-commerce would grow at a faster rate than expected through the end of 2016, as the consumers in the U.S. continue showing more strength
On the domestic side, margins have been expanded though the economy was not as strong as the company would have liked, said CEO David Abney.
However, we realize the key for the company is not what the economy might hand to us or might blow against us, but it could be more about remaining focused on strategies, added Abney.
The quarterly results show that UPS’ efforts of improving its profitability during the higher cost delivery segment of e-commerce have started to payoff.
However, the strength in consumer spending and e-commerce was offset by the slowing of exports because of the strength of the dollar and the inventory overhang amongst its industrial customers that are hurting shipments of business to business, the annual stronghold of the business.
Delivering packages from e-commerce tends to be more expensive because of the scattered nature of residential deliveries. UPS has taken on several initiatives to produce higher returns.
It has increased prices across its product and services board with increases in specific, targeting bulkier and bigger packages that fill up trucks and are longer to deliver.
The company has as well been working to group more consumer deliveries adding retail locations as well as lockers for pickups.
Its software for proprietary routing software, Orion, helped to shave minutes as well as miles off routs of veterans.
Operating profits for the U.S. business of the company was up 2.7% to more than $1.23 billion.
Cross border as well as export shipments grew in Europe helping the company’s results for its international segment.
It is expected that the shift to e-commerce will continue to grow which means that couriers such as UPS and FedEx will continue to have to find ways of innovation to keep their margins higher and their service at the top.