Brooke Sutherland, Columnist

UPS's Shipping Blues

And Amazon is looming.

January 31, 2017 at 7:33 PM UTC

Updated on

January 31, 2017 at 9:37 PM UTC

Brooke Sutherland is Bloomberg News' Boston bureau chief and writes the Industrial Strength Newsletter. She was previously a Bloomberg Opinion columnist covering deals and industrial companies and an M&A reporter for Bloomberg News.

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United Parcel Service Inc.'s holiday-season scorecard is out, and for the third year in four it reads e-commerce: 1, company: 0.

The $96 billion package-delivery company on Tuesday reported weaker-than-expected earnings-per-share for its peak holiday quarter and underwhelmed analysts with its outlook for 2017. A significant part of UPS's earnings woes are related to the strong U.S. dollar, but the company also cited a huge (11.5 percent) surge in shipments to residences from businesses. That online shopping boost is great for revenue, but not for margins. UPS's brown trucks typically only drop off one package at a time when they deliver to homes and have to make more frequent stops, resulting in higher costs.

It's the latest example of UPS getting caught somewhat flatfooted by the e-commerce boom, and that's making the threat posed by Amazon.com Inc.'s recent interest in starting its own logistics business loom all the larger. UPS and its rival FedEx Corp. have tried to downplay the immediate impact of having the e-commerce giant as a competitor and Amazon for its part has insisted it's trying to supplement the carriers rather than replace them, despite a steady drumbeat of investments in shipping capabilities.