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UPS Slammed As Customers Seek Cheapest Service

United Parcel Service’s stock was slammed Wednesday after the company released earnings that missed expectations. Volumes were strong — overwhelming, in fact, during the holiday season — but customers used UPS’ least expensive services.

“As the retail market shifts to a direct-to-consumer model, more and more companies are leveraging UPS solutions,” said Scott Davis, UPS chairman and CEO. “As a result, we experienced an unprecedented increase in volume, exceeding even our most optimistic plans.

“The increased volume put a strain on our network, causing delays. In response, UPS deployed additional people and equipment, placing a greater emphasis on service than cost,” Davis explained. “UPS will make the necessary investments and operational improvements to ensure we meet the needs of the marketplace.”

Total revenue per package declined 1.3%, as lower fuel surcharges, changes in product and customer mix, as well as higher service refunds, contributed to the drop. Shippers continue to utilize the UPS portfolio, choosing lower cost over faster delivery, as evidenced by more than 30% growth in UPS SurePost (the last-mile delivery service of packages shipped through the Postal Service) … (click to read more)