UPS raised its annual sales outlook ahead of the holiday season after average revenue per US parcel increased 6.1% in the latest quarter, Bloomberg Television reported, citing the company.
The revised outlook exceeded estimates, although the size of the increase and the sales target were not given. Higher prices accounted for much of the improvement, while parcel volumes held up.
UPS's chief executive said the company was entering the holiday season from a “position of strength.” The remarks were cited in “UPS Raises Sales Outlook Ahead of Holiday Season,” published Oct. 27 by Bloomberg Television.
The holiday period is the company's busiest time of year. The company had raised shipping prices to offset higher fuel costs, and customers continued to send parcels despite those increases.
The available figures did not provide a full breakdown of how much higher shipping volumes and higher prices each contributed to the stronger outlook. Pricing accounted for much of the improvement described.
About half of the increase in revenue per US parcel came from fuel charges, which helped the company recover higher costs. The remaining half came from increases in its underlying shipping prices.
That distinction separates the money collected to cover more expensive fuel from increases in the price of the delivery service itself. Both contributed to the higher average revenue collected on each parcel.
The company has sought more premium parcel business and less work that leaves it with a smaller profit on each delivery. Higher underlying prices accompanied that effort to change the business it handles.
The fourth-quarter volume outlook also involved a comparison with a period when UPS handled more business for Amazon. That earlier business contributed to higher parcel volumes against which the company's current shipping activity is measured.
Fuel remained a cost for UPS even with the additional charges collected from customers. Higher fuel expenses reduced its profit margin, the share of revenue left after costs, to some extent.
Other transport companies also use extra fuel charges to recover costs from customers. Railroads had recovered much of the increase, while trucking companies also applied such charges to their shipping services.
The recovery does not always happen quickly enough to cover the additional expense within the same quarter. Some trucking companies had struggled to collect the money fast enough to protect their quarterly results.
The higher annual outlook left the precise contribution from shipping demand unresolved. The figures available established that pricing helped revenue, but did not quantify the separate contribution from changes in parcel volumes.
