UPS Slashes 12,000 Jobs In Cost-Cutting Move, Shares Plunge

United Parcel Service Inc. UPS witnessed its most significant drop in shares since April 2023. The company’s latest financial report revealed revenues falling below expectations, coupled with weaker-than-anticipated guidance for the future, leading to a sharp market reaction.

Massive Job Cuts Amid Rising Costs: To mitigate financial pressures, UPS announced the dismissal of 12,000 employees, representing about 14% of its managerial workforce.

According to Reuters, unexpected labor contract-related costs in the second half of 2023 exceeded estimates by approximately $500 million. CEO Carol Tomé expects these job cuts to save the company around $1 billion in 2024.

A Year Marked by Declining Sales and Profits: The last quarter of 2023 proved challenging for UPS, with reported revenues of $24.9 billion, down from $27 billion the previous year and below the analysts’ projection of $25.43 billion. The full-year sales saw a 9.3% decline, totaling $90.96 billion. Despite these challenges, the adjusted profit per share of $2.47 slightly outperformed the analysts’ expectation of $2.46.

"2023 was a unique and difficult year and through it all we remained focused on controlling what we could control, stayed on strategy and strengthened our foundation for future growth," Tomé stated in an official statement.

Chart: UPS Faces Worst Trading Day In 8 Months

2024 Projections Indicate Further Struggles: The outlook for 2024 is not promising for UPS. Revenue expectations are set between $92 billion and $94.5 billion, below analysts’ estimates of $95.57 billion.

The forecasted adjusted operating margin of 10% to 10.6% is also below both the 2023 figure and the analysts’ predictions. Tomé indicated that the small package market in the U.S., excluding Amazon, is projected to grow by less than 1%.

The logistics industry is facing intensified pressure, with customers increasingly seeking discounts and shifting towards more cost-effective ground-based delivery services. This trend is impacting both UPS and its competitor FedEx. It reflects the broader challenges in the delivery and logistics sector due to shrinking demand.

Now Read: Starbucks Q1 2024 Earnings Preview: Can The Coffee Giant Brew Up Another Beat?

Image: Shutterstock