UPS announced better-than-expected performance in third-quarter earnings, with growth across all segments, gains from network optimization, increased revenue from profitable small and medium businesses (SMBs) and strong outbound demand from Asia.
“We are making progress against the ‘better, not bigger’ framework we outlined in July,” CEO Carol B. Tomé said on the investor conference call. “We’re leaning in on the wildly important areas of our business and tackling challenges head on.”
Despite the COVID-related economic downturn, UPS successfully optimized its network and grew share with profitable SMBs.
The company also saw the highest quarterly growth in nearly three years in the International, and Supply Chain and Freight segments.
Using the corporate strategy as a platform, Carol highlighted achievements and challenges for Q3 and beyond.
Customer First. “We’ve heard from customers that speed and ease are most important, so we are focused on delivering the capabilities that matter most to our customers,” she said.
- In the U.S., UPS completed weekend expansion ahead of schedule.
- Weekend Ground volume is up 161% versus last year.
- The company expects to complete Our Fastest Ground Ever in November, eight months ahead of plan. At that point, UPS will hold an advantage or parity position in 20 of the top 25 most populated markets.
- Through the Digital Access Program, highly-profitable SMBs can easily open a UPS account
- In the third quarter, total SMB volume in the U.S. grew at the highest rate in 16 years.
- UPS continues to pursue healthcare logistics through expanded freezer farm capacity, real-time monitoring of shipments and continued support of clinical trials, as well as a focus on the upcoming distribution of COVID-19 vaccines.
People Led. “We know successful outcomes are built from a strong culture of teamwork, respect, trust and empowerment,” Carol said.
- Leadership is focused on giving UPSers more decision-making authority, as well as identifying which activities add value and stopping those that don’t.
- Recent investments in training, including unconscious bias and diversity and inclusion, will help align actions and values.
Innovation Driven. “We are on a journey to optimize the volume that flows through our network,” she said.
- UPS is pursuing growth from the right opportunities, like SMBs, International, Global Freight Forwarding and other high-yielding sectors.
- Transformation efforts are vitally important to achieving greater efficiency and a lower cost to serve.
- To improve return on invested capital, UPS is scrutinizing capital spending and ensuring clear linkage to cash returns. Investors can expect capital spending for 2021 to be significantly lower than spending in 2020.
Looking to the fourth quarter, Carol addressed performance expectations for the holiday season.
“We have been operating in a peak-like environment globally for many months, which is helping us prepare for the elevated demand ahead,” she said.
As in previous years, UPS will collaborate with customers to match their needs to UPS’s available capacity. Increased automated sort capacity, expanded weekend operations and Our Fastest Ground Ever will also help manage the expected increase in volume.
Carol reminded investors all aspects of the business, apart from the five core principles, are under review.
“I’ve spent a lot of time looking at the risks and opportunities facing our business, including an evaluation of our business portfolio,” she said. “We are an opportunity-rich company. We are making progress, but given the size of our business, it will take time to optimize our network, to stop processes that have added cost and no customer value, and to fully reach our potential.”
“We are making progress against the ‘better, not bigger’ framework we outlined in July,” CEO Carol B. Tomé said on the third-quarter investor conference call. “We’re leaning in on the wildly important areas of our business and tackling challenges head on.”