UPS warns of holiday hit to profits

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UPS warned Friday that its profits will take a hit from extra expenses during last year’s holiday delivery season, when the company was striving to repair its reputation for on-time shipments.

“Clearly, our financial performance during the quarter was disappointing,” David Abney, CEO of Sandy Springs-based UPS, said in a statement issued by the company. “Though customers enjoyed high quality service, it came at a cost to UPS.”

After its 2013 holiday delivery season was plagued with delays and customer complaints, UPS last year spent $500 million to expand operations and hired tens of thousands more seasonal workers. While some days had huge spikes in volumes, other days had lighter demand than expected.

Costs for overtime, training, and contractors all weighed heavily, along with disruptions from a West Coast port labor dispute.

UPS said it expects fourth quarter earnings per share of 49 cents, and adjusted earnings per share of $1.25, significantly missing expectations.

UPS shares fell 9.9 percent Friday to close at $102.93.

“You could say they messed up two years in a row — one year by missing customer expectations, another year by missing analyst expectations,” said S&P Capital IQ analyst Jim Corridore. “They have to find a way” to meet expectations for both.

Abney, acknowledging that the company has more work to do to adjust to the expansion of e-commerce, said the company would reduce operating costs and put in “new pricing strategies” during the peak holiday shipping season.