United Parcel Service Inc. (UPS) will cut 12,000 jobs this year, the carrier announced Jan. 30. That’s part of a plan to generate $1 billion in savings as revenue and package volume decline, CEO Carol Tome said.
UPS consolidated revenue declined 7.8% to $24.9 billion in its fiscal fourth quarter ended Dec. 31. Consolidated operating profit declined 22.5% during the same time period to $2.5 billion. For the full fiscal 2023 year, consolidated revenue declined 9.3% to $91 billion and consolidated operating profit declined 28.7% to $9.1 billion.
“2023 was a unique and quite candidly a difficult and disappointing year. We experienced declines in volume, revenue, and operating profit in all three of our business segments. Some of this performance was due to the macroenvironment and some of it was due to the disruption associated with our labor contract negotiations as well as higher costs associated with the new contract,” Tome told investors.
532 online retailers in the Digital Commerce 360 Top 1000 use UPS for their fulfillment — either exclusively or in combination with other carriers. 65.6% of Top 1000 sales come from retailers using UPS. The Top 1000 is a ranking of North America’s leading retailers by online sales.
UPS domestic revenue results
U.S. domestic segment revenue declined 7.3% to $16.9 billion in the quarter, UPS said. Average daily volume (ADV) ended the quarter 7.4% below 2022 levels. However, that still represented a step up from an “exceptionally low third quarter” that preceded the period, Tome said. Revenue per piece of mail was slightly positive, the carrier said without revealing more.
B2B made up 35.5% of domestic volume in the quarter, about flat from 2022. B2B ADV declined 6.8% year over year, due to declines in the retail, tech, and manufacturing sectors, UPS said.
Total air ADV declined 15% year over year, while ground declined 5.8%. Macroeconomic pressures pushed UPS customers toward ground products to cut costs, it said.
UPS international revenue results
Revenue and package volume also declined internationally, largely due to softening demand in Asia and Europe, Tome said. Revenue declined 6.9% year over year to $4.6 billion, driven by an 8.3% decrease in ADV. Revenue per piece grew 3.1%.
The carrier highlighted a few bright spots in the international segment. Volume from China to the U.S. grew 2.7%. That remains the most profitable shipping lane, UPS said. The growth was largely driven by small and medium-sized businesses. Volume in the Americas also grew, up 11.9%. That was the result of Canadian and Mexican customers using cross-border ground shipping services, UPS said.
2024 projections
UPS remains “cautious” looking ahead to 2024, it said. European export volumes are projected to increase, and the carrier expects volume from China to continue growing, too.
In the fourth quarter, UPS recovered much of the volume lost to a potential strike earlier in 2023, Tome said. The business will be burdened by rising costs this year, including from the higher labor costs won in union negotiations with the Teamsters. Eliminating the 12,000 positions is intended to mitigate those rising costs, she said. Layoffs will impact managerial positions, not union jobs, it said. UPS has about 495,000 employees as of January, Tome said. That’s down from a high of 540,000 during peak COVID-era demand.
UPS said the first half of 2024 will likely be difficult, while projecting profit to grow 20 to 30% in the second half of the year.
UPS quarterly earnings
For the fiscal fourth quarter ended Dec. 31, 2023, UPS reported:
- Consolidated revenue declined 7.8% to $24.9 billion.
- Consolidated operating profit declined 22.5% to $2.5 billion.
- UPS average daily package volume declined 7.5%.
For the 12 months ended Dec. 31, 2023, UPS reported:
- Revenue declined 9.3% to $91.0 billion.
- Operating profit declined 28.7% to $9.1 billion.
Percentage changes may not align exactly with dollar figures due to rounding. Check back for more earnings reports.
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