- UPS announced Tuesday it would cut 12,000 jobs
- The company's revenue fell by $1.87 billion last year
- A UPS spokesman said 75 percent of the cuts will occur in the first half of the year
UPS has announced it will cut 12,000 jobs after the company's revenue fell by $1.87 billion, saying that “2023 was a disappointing year.”
In a post-earnings conference call on Tuesday, the package delivery company said the decline in income was due to higher union labor costs and weaker demand.
“2023 was a unique and difficult year.” “We remained focused on controlling what we could control, staying true to strategy and strengthening our foundation for future growth,” said CEO Carol Tomé.
A UPS spokesman said 75 percent of the cuts will occur in the first half of the year and that jobs around the world in all positions will be affected.
The layoffs come just five months after UPS and Teamsters reached a $30 billion deal with their 340,000-member union, avoiding a potentially crippling strike.
UPS has announced it will cut 12,000 jobs after the company's revenue fell by $1.87 billion
The agreement increased the company's hourly wage to $49 for full-time employees and $21 for part-time employees.
The looming strike negatively impacted business as worried customers decided to use other providers such as FedEx and Amazon.
UPS said it has only recovered about 60 percent of its lost business since the collapse, but expects that number to rise.
The company has forecast that global revenue in 2024 is expected to be between $92 billion and $94.5 billion, but analysts expect $95.57 billion, according to LSEG data.
“The U.S. small package market, excluding Amazon, is expected to grow less than 1%,” Tome said.
The fact that customers switched from airborne services to less lucrative ground delivery also played a role in the company's decline.
CEO Carol Tomé said that 2023 was a “difficult year” and that “throughout all of this, we remained focused on controlling what we could control, staying true to our strategy and strengthening our foundation for future growth.”
CFO Brian Newman said employment-related costs in the second half of 2023 are expected to be about $500 million above the company's estimates
UPS reported a 6.9 percent decline in international sales due to weak volumes in Europe in the fourth quarter. They also recorded a decline of 7.3 percent in the domestic segment.
The company reported quarterly revenue of $24.9 billion, down from $27 billion a year ago and below analyst estimates of $25.43 billion.
Labor contract-related costs were expected to be about $500 million above the company's estimates in the second half of 2023, Chief Financial Officer Brian Newman had previously said.
Adjusted earnings fell to $2.47 per share from $3.62 a year earlier, but were slightly above analyst estimates of $2.46 per share.
“It's a change in the way we work. So when volume comes back into the system, we don't expect those jobs to come back. “It changes the effective way we work,” Newman said.