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Oct 24, 2014 3:13 PM

UPS expects double-digit surge in Dec shipments

The Associated Press

DALLAS (AP) UPS might levy surcharges or even turn away some holiday shipments this year if retailers surprise the delivery giant by dropping off more packages than they had planned.

UPS executives discussed the possibilities Friday as they detailed plans for improving on last holiday season, when many consumers didn't get their packages by Christmas as promised.

Online shopping is growing faster than the store-based kind. That's good for United Parcel Service Inc. and FedEx Corp., and on Friday, UPS predicted that December shipments will rise 11 percent over the same month last year.

Atlanta-based UPS offered the forecast while reporting that third-quarter net income rose 11 percent to $1.21 billion, or $1.32 per share, beating Wall Street expectations of $1.28 per share. Revenue was $14.29 billion, topping analysts' forecast of $14.20 billion, according to FactSet.

In afternoon trading, UPS shares rose 25 cents to $100.73.

The delivery companies have learned that with the opportunity presented by online shopping, there are also challenges. Last year, a surge in late orders overwhelmed them and resulted in an estimated 2 million express packages missing their Christmas Eve delivery deadlines. About 1.3 million of those were UPS packages, according to tracking-software firm ShipMatrix Inc., which said the retailers were at fault about 70 percent of the time for overpromising on last-minute guaranteed deliveries.

UPS has spent the year bulking up facilities and technology, and talking to retailers to better predict shipping volumes this holiday season.

On Friday, the president of U.S. operations for UPS, Myron Gray, said that if retailers exceed their shipping quotas, UPS might "mute what they are giving to us." The company's chief commercial officer, Alan Gershenhorn, said there could be surcharges.

Asked to clarify the remarks, UPS officials said they would first work with retailers to reschedule unexpected shipments but might have to turn some away. Surcharges would be possible for shipments that force UPS to hire more truck drivers or reserve airfreight capacity, they said.

UPS Chief Financial Officer Kurt Kuehn told The Associated Press that some retailers who jumped into e-commerce last year "perhaps got a bit overzealous with their promotions and made some commitments for delivery with virtually no room for error."

Kuehn said that some retailers delivered shipments to UPS "at the last minute," but that UPS made mistakes too. He said he was confident that the company will perform up to expectations this time around.

UPS expects to spend $175 million on temporary facilities and add up to 95,000 seasonal workers to handle the holiday crush.


AP Business Writer Michelle Chapman in New York contributed to this report.


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