UPS takes a hit during the holidays, cuts outlook

NEW YORK (AP) - The huge cost of ensuring timely deliveries cost UPS during the holidays and the shipping company cut its outlook for the year.

Its shares plunged almost 10 percent in morning trading Friday.

The Atlanta company hired more workers and boosted capacity at its facilities during the busy holiday season to avoid a repeat of 2013, when shippers struggled with a deluge of orders. Millions of packages sent through shipping companies failed to arrive in time, largely due to a surge last-minute online shopping.

"UPS invested heavily to ensure we would provide excellent service during peak when deliveries more than double," said CEO David Abney. "Though customers enjoyed high quality service, it came at a cost to UPS."

The disappointing news from UPS shows how difficult logistics have become as shopping habits of Americans change.

The company added capacity to prepare for the "extreme spike" in volume on Cyber Monday and on Dec. 22, which is a peak delivery day before Christmas. However, UPS said demand fell on other days, meaning that the company's tires began to spin.

An ongoing labor dispute between longshoremen and shipping lines on the West Coast has also led to additional difficulties in shipping.

The company will cut costs and change its pricing strategy during the peak shipping season this year, Abney said in a printed statement.

UPS now expects 2014 earnings of $4.75 per share, down from its previous forecast of between $4.90 per share and $5 per share. Industry analysts had been looking for earnings of $4.96 per share, according to FactSet. For the fourth quarter, UPS expects earnings of $1.25 per share, well below the $1.47 per share analysts had projected.

Shares of UPS Inc. fell $10.91 to $103.34 early Friday. Shares of FedEx Corp. fell $3.23, or 1.8 percent, to $178.17.