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UPS COO's retirement eclipses e-commerce gains

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UPS COO's retirement eclipses e-commerce gains
FILE PHOTO: An United Parcel Service employee works at the new package sorting and delivery UPS hub in Corbeil-Essonnes and Evry, southern Paris, France, June 26, 2018. REUTERS/Charles Platiau/File Photo   -   Copyright  Charles Platiau(Reuters)
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By Lisa Baertlein and Sanjana Shivdas

(Reuters) – United Parcel Service Inc’s <UPS.N> e-commerce fuelled quarterly profit beat on Tuesday was overshadowed by news that Jim Barber, widely viewed as the world’s biggest parcel delivery firm’s next leader, would retire at year-end.

Shares in Atlanta-based UPS fell 3 percent to $115.03 on news of the departure of Chief Operating Officer Barber, 59, who oversees the company’s global small package, freight, supply chain, freight forwarding and engineering, and was instrumental in the company’s turnaround.

“Investors assumed he was going to be the next CEO and this caught us by surprise. Unfortunately, the market does not like surprises,” Seaport Global analyst Kevin Sterling said.

Barber’s retirement comes just months after similar news from Chief Financial Officer Richard Peretz, ushering in big changes to the UPS C-suite at a time when cooling economies in Asia and Europe threaten global growth.

“We have a strong bench. Succession planning is something we constantly focus on,” Chief Executive David Abney said on a conference call with analysts.

UPS said Barber and Peretz will guide UPS through the key holiday peak shopping and shipping season, when the company’s daily volumes can double.

Profit was up 16% to $1.75 billion for the third quarter. UPS earned $2.07 per share, excluding items, to top analysts’ average forecast by a penny, according to IBES data from Refinitiv.

The U.S. consumer continues to spend, bolstering online sales that fuelled a 24% rise in UPS Next Day Air U.S. delivery volume during the third quarter.

That business ticked up significantly during the summer, after UPS rival FedEx Corp’s <FDX.N> breakup with online retailer Inc <AMZN.O>.

“It’s Amazon, but it’s beyond Amazon,” Abney said in a telephone interview with Reuters.

“Companies are competing on time. Next Day has become the standard. We see it in our Next Day Ground and our Next Day Air,” said Abney.

The company’s multi-billion-dollar investments in network upgrades shaved per-package costs by 2.5% during the third quarter, helping to offset a 10.1% drop in revenue per piece for domestic Next Day Air.

That deterioration in revenue per piece is likely due to the small packages that Amazon is shipping – including single bars of soap or deodorant, said Cathy Morrow Roberson, founder of consulting firm Logistics Trends & Insights.

Investors remain wary that the U.S.-China trade war could further dent global economies and UPS, whose international package group accounts for roughly 35% of operating income.

(Reporting by Sanjana Shivdas in Bengaluru and Lisa Baertlein in Los Angeles; Editing by Shinjini Ganguli and Nick Zieminski)

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