UPS Announces Layoffs
UPS, one of the world’s leading package delivery companies, fell short of Wall Street revenue estimates in its fourth-quarter earnings report on Tuesday. The company reported drops in shipping volume, both internationally and domestically, which contributed to disappointing financial results. In response to these challenges, UPS also announced 12,000 layoffs as part of an effort to align resources in 2024.
According to CEO Carol Tomé, the workforce reductions will save the company approximately $1 billion in costs. This move comes as UPS looks to streamline operations and improve profitability after a difficult 2023. Tomé described the year as “unique” and “disappointing,” citing declines in volume, revenue, and operating profits across all three of the company’s business segments.
In the fourth quarter, UPS reported net income of $1.61 billion, or $1.87 per share, compared to $3.45 billion, or $3.96 per share, in the same period last year. Adjusting for one-time items, the company earned $2.47 per share, slightly above Wall Street’s estimate of $2.46 per share, according to LSEG. However, revenue fell 7.8% to $24.9 billion, missing analysts’ expectations of $25.43 billion.
The decline in revenue was driven by a 7.4% drop in average daily volume domestically and an 8.3% decrease internationally. Tomé attributed the international softness to various factors, including challenges in Europe and disruptions in the Red Sea region, the Panama Canal, and the Suez Canal. The CEO also mentioned ongoing negotiations with the Teamsters over labor contracts as a contributing factor to the company’s challenging year.
How it started: UPS drivers to make $170,000 in pay and benefits following Union deal
How it’s going: UPS to slash 12,000 jobs after increased labor costs
A tale as old as time pic.twitter.com/uV1RdmpOYT
— DC_Draino (@DC_Draino) January 30, 2024
In addition to the layoffs, UPS also announced that it is considering selling its Coyote truck brokerage business. Tomé described this subdivision as a “highly cyclical” business with “considerable earnings volatility.” The potential sale is part of the company’s strategy to focus on its core strengths and improve overall performance.
In response to the macroeconomic environment and ongoing challenges, UPS has also outlined its outlook for 2024. The company expects revenue to range from $92 billion to $94.5 billion, with an adjusted operating margin of about 10% to 10.6%. Tomé stated that the company’s goal is to “drive continuous improvement in our business.”
In addition to financial measures, UPS also provided updates on its plans for its workforce and operations. Starting in 2024, the company will ask employees to return to the office five days a week, a change from the hybrid work model adopted during the pandemic. Tomé explained that this will allow for more collaboration and productivity, which are essential for achieving the company’s goals.
Despite facing challenges in 2023, UPS remains optimistic about its future prospects and is taking proactive steps to improve its performance. Through cost-cutting measures, strategic changes to its business operations, and a focus on its core strengths, the company aims to overcome the challenges faced and drive growth in the coming years. As the world’s reliance on package delivery continues to increase, UPS is well-positioned to capitalize on this trend and maintain its position as a leader in the industry.