UPS To Lay Off 12,000 Employees After Falling Revenues

The delivery company UPS (United Parcel Service) fell short of Wall Street’s projected revenues in the fourth quarter of 2023, seeing drops in both international and domestic shipping volumes. The year was, by all measures, challenging and disappointing. To top it off, the company is gearing up for an even more daunting 2024, with plans to lay off 12,000 of its workers.

The workforce reduction is a strategic move meant to cut about $1 billion in costs, according to CEO Carol Tomé on an earnings call. Falling revenues, operating profits, and volumes characterized 2023 — a trifecta of financial pain cutting across all business segments. All of this culminated in a more than 8% dip in the company’s shares.

Contrary to expectations, UPS earned $2.47 per share as adjusted earnings, slightly above the $2.46 forecasted by LSEG (formerly Refinitiv). However, the company reported a revenue of $24.92 billion, falling short of the projected $25.43 billion.

The final quarter of 2023 was particularly rough for UPS. The company’s net income was $1.61 billion, or $1.87 per share, a marked decrease from the $3.45 billion, or $3.96 per share, reported a year earlier. After accounting for one-time items related to pensions and intangible assets, the company still earned $2.47 per share.

UPS saw its revenue take a 7.8% hit, closing at $24.9 billion, down from $27 billion the previous year. Average daily volumes also declined, with a 7.4% drop domestically and an 8.3% decrease internationally. Europe was a soft spot, weighed down further by freight issues in the Red Sea region, as well as the Panama and Suez canals.

Unsurprisingly, this disappointing period wasn’t in isolation. It was also a time of challenging labor contract negotiations with the Teamsters and broader economic conditions.

UPS also opened up about considering selling its Coyote truck brokerage business, known for its highly cyclical nature and considerable earnings volatility. Moreover, the company plans to have workers return to the office five days a week in 2024, altering their work-from-home routines.

Looking ahead, UPS anticipates its 2024 revenue to be between $92 billion and $94.5 billion, with an adjusted operating margin of about 10% to 10.6%. Despite the tough year, the company remains focused on strategic initiatives and adaptation efforts to navigate future challenges.