In a dour message on the global economy, Sandy Springs-based UPS reported a $1.07 billion profit for the second quarter, down from nearly $1.12 billion a year ago.
Revenue grew 1.2 percent to $13.5 billion, but penny-pinching customers are choosing cheaper, slower shipping options with lower margins. UPS cited lowered forecasts in 10 of the 12 largest economies.
“Clearly, there’s less need for speed in a soft global environment,” said UPS chief executive officer Scott Davis. Part of the trade-down is cyclical, while some of it is “likely permanent” as more international trade is conducted regionally and supply chains become more efficient, he said.
What drives express shipments is new high-tech product launches, Davis said, which are expected to pick up later in the year.
The 4 percent decline in net income brought the shipping giant’s diluted earnings per share down to $1.13 for the quarter, compared with $1.15 in the same period last year.
Results were affected by a decline in the military sector moving equipment overseas and difficulty winning new customers during labor negotiations in the second quarter. The Teamsters voted in June to approve a national UPS labor contract but rejected a smaller contract covering UPS freight workers and some supplemental agreements. UPS has reached deals for contract extensions as it continues negotiations.
Chief financial officer Kurt Kuehn called the quarterly results “below our expectations.”
The company said it is adapting to market conditions, including cutting Asia capacity by about 20 percent amid competition from airlines carrying belly cargo.
“We may suspend hiring a little bit but we don’t expect any direct layoffs as a result of these initiatives,” Kuehn said. The company still sees growth opportunities in emerging markets, healthcare and other areas, he said.
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