* Expects fourth-quarter earnings/shr $1.25 vs est $1.43
* Sees 2013 earnings/shr $4.57 vs forecast $4.65-$4.85
* Costs up as 30,000 more staff deployed
* Shares fall as much as 3.5 pct
(Add details on shipping, industry changes, analysts' comments)
By Nivedita Bhattacharjee and Sagarika Jaisinghani
Jan 17 United Parcel Service Inc said on
Friday its fourth-quarter earnings will fall well short of
market estimates due to a surge in online shopping just before
Christmas that caught the company off guard and led to late
deliveries and higher costs.
Typically, a rise in online sales is good news for companies
such as UPS and competitor FedEx Corp because it
translates into brisker demand. But UPS said it had been
overwhelmed by the volume of holiday packages, delaying the
arrival of Christmas presents around the globe and spurring
angry customers to take to social websites to complain.
UPS said it delivered more than 31 million packages on Dec.
23, the most in its history. Moreover, that highest-volume
delivery day came six days later than the company had expected
and volume was 7.5 percent higher than it had planned for.
That, coupled with ice storms and heavy snow that snarled
roads and airports, added to shipping
UPS did not say how many packages were delayed, but said it
had to hire 30,000 extra workers to try to get all the parcels
delivered on time. That was more than 50 percent more temporary
staff than it had planned to hire. Extra equipment was also used
to try to get gifts delivered on time.
The world's No. 1 package delivery company's shares fell as
much as 3.5 percent early on Friday before retracing some of
that loss later in the day.
While U.S. retailers and shipping companies were aware the
2013 holiday-shopping season would be shorter - there were six
fewer days between Thanksgiving and Christmas - many were
overwhelmed by the change in customer buying patterns.
Yvonne Roeske, for instance, owner of a home furnishing
store in Park Ridge, Illinois, who uses UPS ground shipping,
said she did not see a 25 percent rise in online volume coming.
She said that due to their experience with Amazon.com
, shoppers are getting more comfortable waiting until
the last minute before making online purchases and still getting
delivery in one or two days.
This past season, shoppers got direct mail from Amazon
guaranteeing Christmas Day delivery on orders placed as late as
Dec. 22. But while bigger shippers like Amazon are able to
fulfill last-minute demands, many others cannot.
A "GOOD" MISS:
UPS estimated fourth-quarter diluted earnings of $1.25 per
share, well short of the $1.43 per share expected by Wall
Street, according to Thomson Reuters I/B/E/S.
The company estimated full-year earnings of $4.57 per share,
below its previous forecast of $4.65-$4.85. The average market
expectation had been for a profit of $4.75 a share.
"If there's ever a 'good' miss, this is one," said Benjamin
Hartford, a logistics analyst at Baird Equity Research.
Like Hartford, most analysts on Wall Street said that though
UPS's fourth quarter will be affected, the jump in traffic bodes
well for the company's future, specially since UPS said it was
confident in its 2014 outlook.
UPS said it expects full-year diluted earnings to rise by
10-15 percent this year, implying a profit of $5.02-$5.26 per
share. Analysts had expected $5.48.
"This glitch causes short-term costs like overtime and extra
employees, but shows really strong online fulfillment demand. It
bodes really well for UPS in the long term," said Keith
Schoonmaker, analyst at Morningstar.
UPS's shipment volumes and forecasts, along with those of
rival FedEx, are closely watched by Wall Street and considered
an indication of overall economic health because of the vast
amount of goods they transport.
Shares in UPS, due to report results on Jan. 30, fell to as
low as $97 on the New York Stock Exchange before rebounding to
$98.90 in the afternoon.
(Editing by Joyjeet Das, Rodney Joyce and Peter Galloway)