UPS reports $2.66 billion profit for first quarter

Credit: TNS

Credit: TNS

Revenue grows on increased shipping rates as package volume dips.

Sandy Springs-based UPS reported $2.66 billion in net income in the first quarter of the year, as it increased the cost to ship packages.

UPS has been increasing its shipping rates and levying surcharges for fuel costs surcharges and times of peak demand. While online shoppers may get “free shipping” on many orders, the cost of shipping is often included in the price of the product.

The shipping giant saw its total revenue rise 6.4% year-over-year to $24.38 billion in the January-to-March quarter, including growth in its domestic, international and supply chain units. Its operating expense increased 4.9% to $21.13 billion.

UPS carried 3.6% fewer packages in the first quarter than it did a year ago.

But it still managed to bring in more money, because its average revenue per piece increased 9.4% to $13.26 per package. That includes an average of $11.97 per U.S. domestic package, up 9.5%, and $20.45 per international package, up 10.5%.

The higher rates offset a decrease in shipping volume in January triggered by omicron COVID-19 variant, according to UPS.

March also brought lower volume compared with the same month a year ago.

UPS CEO Carol Tomé said that’s because many households received a round of federal pandemic stimulus payments of up to $1,400 in March 2021.

“When the stimulus checks hit last year, we saw our average daily volume jump” by 400,000 packages, Tomé said. This year, without those payments to goose spending, UPS saw a year-over-year decrease in shipping volume for March.

“There has been a bit of a shift from goods to services,” Tomé said. “We’re not going to see the kind of growth that we experienced during COVID, clearly, but e-commerce sales will continue to grow.”

Overseas, UPS had lower export volume than expected, in part because of COVID lockdowns in Asia. UPS has a hub in Shanghai, and has suspended imports into Shanghai and pickups there and in some other cities in China.

“We still have people sleeping in sleeping bags in the hub,” Tomé said. “We’re going to get through this.”

The company on Tuesday reaffirmed its plan to increase its full-year 2022 revenue to about $102 billion and hit other financial targets.

“We expect our path to achieve these financial targets will be different” than planned earlier this year, Tomé said. Volume will be lower, but shipping rates are higher.

“We have many levers to pull,” she said.