The first quarter has brought bad news for UPS, as the company reported a 6% drop in revenue compared to the same period last year, and a 22% decline in operating profit. UPS earnings for Q1 also fell short of Wall Street forecasts. Despite strong January sales volumes, the US retail market decelerated in February and continued to weaken in March, with volumes 7% down on 2022. UPS CEO Carole Tome admitted the volume slump “caused us pause.” UPS has also revised down its earnings outlook for 2023 to the lower end of its previous estimates.
UPS blames the slowdown on weaker global demand and a less-than-expected post-COVID economic recovery. The pandemic is still affecting global trade, with UPS facing ongoing weakness in Asia. The company expects the pressure on volumes to continue. Shares in UPS fell over 6% after the earnings announcement.
The company is currently in contract negotiations with the Teamsters union, which represents over 340,000 of UPS’s 444,000 employees. The union’s contract expires on 1 August, at which point it could call a strike. The ongoing negotiations may also be contributing to a shift of packages to other carriers, although Tome said that the company was closely engaged with major customers to assure them about the negotiations.
Tome said there had been “good progress” on staffing for weekend deliveries and in providing relief from heat in UPS delivery vans, but the Teamsters’ General President Sean O’Brien had said that the union is “prepared to strike if that’s what it takes to win the contract that members want.” UPS has a long history of labor relations, and there have been 26 strikes since the company was founded over a century ago.
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