Sandy Springs-based UPS said its revenue declined by 12.8% in the third quarter and its profit fell by more than half, amid rocky economic conditions and the effects of lost business during labor negotiations earlier this year.
UPS on Thursday reported net income of $1.1 billion for the quarter ended September 30. That’s down 56.4% from a year ago.
It had revenue of $21 billion, down from nearly $24.2 billion in the same quarter of 2022.
The shipping giant, a U.S. economic bellwether, also slashed its outlook for the full year “primarily to reflect global macro-economic uncertainty,” saying it now expects to bring in $91.3 billion to $92.3 billion in revenue, down from its previous forecasts of $97 billion in April and $93 billion in August.
The adjustment marks a continued decline from last year’s $100.3 billion in revenue. UPS, with more than 500,000 employees, daily carries about 6% of the U.S. gross domestic product and 2% of world GDP.
“We still expect to have healthy peak (holiday) volume in the fourth quarter,” said UPS CEO Carol Tomé. “But based on what appears to be slowing demand in all business segments, we are revising our guidance accordingly.”
The Commerce Department said Thursday the nation’s economy grew at a 4.9% annual rate in the third quarter, though economists have projected the growth could slow later this year.
Tomé said some of the company’s largest retail customers have seen a decline in online sales and same-store sales.
UPS cut staff, closed distribution sites and started using more automation earlier this year when revenue was on the decline due to slower retail sales and weak demand internationally. It said it reduced operations headcount by 7%, cut management headcount by more than 2,500 positions and reduced labor hours by nearly 10%. On Thursday, UPS Chief Financial Officer Brian Newman said falling demand in Asia and economic pressures in Europe drove the company to cut headcount and hours in global networks.
“The global demand environment has slowed and macroeconomic conditions remain challenging,” Newman said. And in the U.S., “headwinds are mounting for the consumer in the fourth quarter.”
In the third quarter, the company’s operating expenses were $19.7 billion, down 6.3% from $21 billion a year ago.
UPS lost a significant share of business amid negotiations with the Teamsters union earlier this year, when some of its customers switched to competitors amid fears that a strike would disrupt their shipments to customers. But UPS and the Teamsters came to a deal July 25, averting the strike, and union members ratified the deal in late August. As a result, labor uncertainty had a negative effect on the business for most of the third quarter, according to Tomé.
Tomé has pledged to work to win back business.
“While unfavorable macro-economic conditions negatively impacted global demand in the quarter, our U.S. labor contract was fully ratified in early September and volume that diverted during our labor negotiations is starting to return to our network,” Tomé said in a written statement.
About 40% of the lost business has returned so far, and Tomé said hopes are to win back the rest by the end of the year. She said UPS has also won about a quarter of a $7 billion pipeline of new business.
The company still announced plans last month to hire more than 100,000 temporary workers for the peak holiday season as it normally does. Tomé said the company is “well-prepared for the peak holiday season.”
UPS is continuing with plans this year to spend $5.3 billion on capital expenditures and pay $5.4 billion in dividends to shareholders, subject to board approval.
On Wednesday, UPS announced it has reached a deal to acquire Happy Returns, a software and logistics company that has a network of drop-off points for no-box, no-label returns and more than 800 merchants as customers. UPS will acquire Happy Returns from PayPal in a deal expected to close in the fourth quarter of this year.
The companies did not disclose terms of the deal, but Tomé said the company is spending a total of about $1.3 billion combined on Happy Returns and the recently-announced acquisition of MNX Global Logistics, which specializes in healthcare logistics.
UPS said it would combine Happy Returns’ drop-off points and digital experience with UPS’s network and its UPS Store locations, to eventually have more than 12,000 U.S. locations for box-free, label-free returns of items.
