UPS Profits Rise to $1.27B Thanks to Ecommerce Growth and Cross Border Shipments

, ,

United Parcel Service (UPS) reported a 3.2% increase in profit fuelled in part by ecommerce growth, writes Wall Street Journal.

However, the delivery giant warned that a weaker industrial environment will continue to drag on.

Revenue increased 3.8% to $14.62 billion for Q2, while profit rose to $1.27 billion.

UPS predicts that its ecommerce business will grow faster than expected through the end of the year as US consumers continue to show strength.

The company has expanded its margins on the domestic side, despite the slow economy. However, as Chief Executive David Abney said, “We have realized that the key to us is not what the economy may hand to us or may blow against us, but its more about staying focused on our strategies.”

The results show that the company’s efforts to improve profitability in the higher cost ecommerce delivery segment are starting to pay off. But the strength in ecommerce and consumer spending was countered by slowing exports due to an inventory overhang among industrial customers, which is negatively impacting B2B shipments, a traditional stronghold for UPS.

Delivering ecommerce packages tend to be more expensive, due to the scattered nature of the residential deliveries. UPS raised prices across the board, with specific increase targeted at bigger packages that take longer to deliver.

UPS has also been working to pool more consumer deliveries, adding retail locations and lockers for self-service pickup.

Cross border and export shipment growth in Europe helped boost the company’s international results. Shipments from Europe to the US alone grew at a double digit pace in the quarter. UPS has been expanding their operations in Europe and other international markets, executives in the company have also said that they would be keeping an eye out for potential acquisitions in emerging markets.

UPS is a solid example of how companies, whether a global giant or a smaller operation, can focus on strategy which will protect them from a volatile market. It also hints at the logistics giant’s global expansion aspirations.

A version of this appeared in The Wall Street Journal on July 29. Read the full version here.