UPS to cut 12,000 jobs as revenue forecast disappoints on weak e-commerce demand

LOS ANGELES - United Parcel Service (UPS) plans to cut 12,000 jobs and explore strategic options for Coyote, its volatile trucking brokerage business, after the world’s largest parcel delivery company forecast full-year revenue below Wall Street’s target.

Shares of UPS tumbled 8 per cent on Jan 30 in New York amid weak demand from its retail, manufacturing and high-tech customers.

The company plans to cut US$1 billion (S$1.3 billion) in costs as it comes off a “difficult and disappointing” year, when volume, revenue and operating profit declined in all of its business segments, UPS chief executive Carol Tome said on a conference call with analysts.

UPS, seen as a bellwether for the global economy, does not expect business conditions to improve until the second half of 2024.

On Jan 30, it forecast full-year revenue of US$92 billion to US$94.5 billion, below analysts’ average target of US$95.57 billion, according to London Stock Exchange Group data.

UPS, FedEx and other delivery firms boomed in the early days of the pandemic, when home-bound consumers binged on everything, from furniture and exercise equipment to sweatpants and televisions.

That trend reversed when travel, concerts and indoor dining resumed, and the resulting drop was exacerbated by inflationary pressures that crimped some e-commerce purchasing.

Both UPS and FedEx have been forced to cut forecasts in the still-uncertain business environment.

Higher labour costs from the new contract with its Teamsters union are also squeezing profits at UPS, which expects to report its lowest consolidated operating margin of the year in the first quarter, UPS chief financial officer Brian Newman said on the call with analysts.

UPS said it has been winning back business that went to rivals like FedEx during its tumultuous labour talks that wrapped up in the summer of 2023. Sixty per cent of that business has returned, Ms Tome said.

UPS expects its average daily volume to pick up in the latter half of 2024, but even then growth will be constrained.

“The small package market in the US, excluding Amazon, is expected to grow by less than 1 per cent,” Ms Tome said. Amazon accounted for 11.8 per cent of UPS revenue in 2023.

Meanwhile, customers are shifting to less lucrative ground-based delivery from more profitable air-based services, hurting profits at both UPS and FedEx.

For the fourth quarter of 2023, UPS reported a 6.9 per cent decline in revenue from its air-based international segment due to significant softness in Europe and a 7.3 per cent decline in its truck-based United States business. REUTERS