UPS benefited from higher shipping charges for customers including retailers, with average revenue per piece up 12.6% in 2021 compared with 2020. That was driven by higher charges across the board, with the biggest percentage increases for international shipments.
The company is growing so rapidly that it now expects to reach its 2023 financial goals a year early, by hitting $102 billion in revenue this year with an adjusted operating margin of about 13.7%.
Shipping volume was higher than expected early in the busy 2021 holiday season as consumers rushed to order gifts early and avoid supply-chain delays, but UPS was able to adjust, said Chief Financial Officer Brian Newman.
By late December, volumes were lower than expected due to the omicron surge and retailers’ low inventories amid the supply-chain crisis. To cut costs, UPS quickly decreased staffing levels and returned leased planes and vehicles earlier than planned.
Demand remained slow in the first week of January, but has since recovered, Tomé said.
Many companies have looked for ways to offset cost increases and find ways to cope with labor shortages. Tomé plans to cut some costs and further increase productivity, including by using automation and eventually RFID technology to replace manual scanning in package-handling facilities.
In some parts of the country last week, workers protested cuts in UPS part-timers’ pay, with labor leaders saying part-time drivers had to take pay cuts “while UPS has been raking in billions of quarterly profits.”
UPS is preparing for additional growth by adding 30 delivery centers and two automated hubs this year. It also plans to add two Boeing 747s to its fleet and buy 3,700 alternative-fuel vehicles, including about 425 electric delivery trucks made by Arrival.
E-commerce behemoth Amazon is UPS’s largest customer. Tomé said UPS revenue from Amazon grew last year and makes up more than 11% of total UPS revenue.
But Amazon has been expanding its own delivery network, prompting UPS to look to other segments for growth. That includes smaller businesses that need to pay for full-service logistics and shipping.
For the fourth quarter, UPS reported $3.09 billion in net income. That represented a turnaround from the $3.35 billion loss in the fourth quarter of 2020, when it recorded a charge for the sale of its freight unit and took an accounting hit from $4.9 billion in non-cash, mark-to-market pension losses.
Revenue in the final three months of 2021 totaled $27.77 billion, up 11.5% from the year-earlier quarter, while operating expenses of $23.88 billion rose 4.5%.
UPS also announced a higher quarterly dividend of $1.52 per share, up from $1.02 for the past four quarters.
By the numbers
12.89 billion: Net profit for UPS in 2021
1.34 billion: Net profit for UPS in 2020
15%: Increase in revenue for UPS in 2021 from 2020