UPS posts $1.1 billion profit for 4Q on high online shopping

DALLAS (AP) — UPS was caught off-guard by the crush of online shopping leading up to Christmas and plans to spend a chunk of its tax-cut savings to invest in its package-delivery network.

The company said today it plans between $6.5 billion and $7 billion of capital spending this year on things like new cargo airplanes and automation in its distribution centers. That's an increase from $5.2 billion last year.

With the prospect of higher spending, shares of Atlanta-based UPS slumped $7.54, or 5.9 percent, to $119.78 in afternoon trading.

Rapid growth in online shopping is a double-edged sword for United Parcel Service Inc. and rival FedEx Corp. They reap higher revenue but are forced to make major investments in their networks to keep up with demand.

UPS said it delivered 762 million packages during the peak season roughly from Thanksgiving through Christmas, an increase of 7 percent over the previous year and 12 million more packages than the company expected.

Atlanta-based UPS said it had to spend $125 million more than it planned to handle the surge in demand, especially around Thanksgiving and the next several days, dubbed "cyber week."

"The volume did exceed the capacity of our network, and it took us some days to dig out, and there was a cost to doing so," Chairman and CEO David Abney said in an interview. "The operation ran much better after that."