UPS 1Q16 Earnings Call Notes

United Parcel Service (UPS) David P. Abney on Q1 2016 Results

Consumer spending remains primary catalyst for growth

“GDP forecasts continue to be revised downward, yet consumer spending remains the primary catalyst for growth in the economy and e-commerce sales have again exceeded the expectations. On the other hand, industrial production remains below 2015 levels.”

US GDP has obviously weakened. Some things that are good, some things that concern you

” I’ll give the same impression to that that I would to the customers, that is it’s very mixed. And U.S. GDP has obviously weakened. Even today, the numbers that came out quarter-over-quarter has showed weakness and year-over-year slight deterioration. But again, you can look and you can find bright spots and then you can find things that worry you. On the one hand, consumer spending continued to be the primary economic driver in the U.S. On the other hand, industrial production has been disappointing; although I can say there has been some recent data on manufacturing that is showing some sign of expansion. On the one hand, again, online retail is continuing to grow much faster than many expected. On the other hand, the especially brick-and-mortar retailers have not done so well. Again, on one hand, inflation and unemployment have stabilized, although wage growth, of course, has been muted. And when you look at it internationally, I think the same thing, you’re going to see positives and you’re going to see things that concern you. From the European Union, we still expect to see that economy grow at a fairly solid pace compared to the recent past, but there are signs of slowing, especially in some countries.”

Alan Gershenhorn – Chief Commercial Officer & Executive VP

Same day e-commerce has challenges

“Currently, as you know, same-day for e-commerce has challenges with consolidating density and single-piece stop economics that could create profitability issues as these companies look for the low-cost model. Deliv’s goal is pretty unique. It consolidates multiple deliveries on one driver with pickups from multiple stores at a mall, for example. So we’re looking to get some key learnings there.”

There’s really more demand for local next day

“At the same time, we believe that because the lion’s share of shopping takes place in the late afternoon and evenings, there’s much more demand for local next-day, which really speaks to the latter part of your question about omnichannel. ”

Omnichannel is a growing trend internationally too

“omnichannel is a growing trend in the retail industry. We’re seeing 30% year-over-year growth in UPS accounts in 2015, and that means at the store level, we’ve got about 120,000 ship from store locations that are shipping or have the potential to ship. We’re starting to see this phenomena start to take place also outside the U.S. in our International business.”