‘The actions we are taking to reconfigure our network and reduce cost across our business could not be timelier’
United Parcel Service (UPS) announced first-quarter earnings that exceeded market forecasts and revealed plans to eliminate 20,000 positions as part of a major cost-cutting strategy.
The initiative is aimed at preparing for a downturn in shipments from its largest customer, Amazon, and navigating ongoing economic uncertainty, says Reuters.
Ahead of Tuesday's market open, UPS shares rose nearly 2% after the company outlined plans to generate $3.5 billion in savings by 2025. The strategy includes both workforce reductions and the closure of 73 facilities by the end of June.
The move comes as companies, responding to extensive tariffs introduced during former U.S. President Donald Trump's tenure, continue to streamline operations in the face of cooling global trade.
Weaker trade flows have already been pressuring shipping volumes between businesses, a trend expected to persist, y, says Reuters.
"The actions we are taking to reconfigure our network and reduce cost across our business could not be timelier," said UPS CEO Carol Tomé.
Despite its aggressive cost-cutting, UPS declined to update its full-year guidance, citing persistent macroeconomic challenges. The company's efforts to tighten operations also include ramping up automation, selling assets, and shutting down underused warehouses, says Reuters.
Evercore ISI analyst Jonathan Chappell noted, "The removal of 2025 guidance will likely create a wide range of outcomes that may be difficult to underwrite without greater macro clarity."
Previously, UPS announced it had shed 12,000 roles in 2024. It now anticipates incurring between $400 million and $600 million in related separation and lease exit costs over 2025.
Earlier this year, UPS had cautioned that it would fast-track efforts to significantly scale back deliveries for Amazon.com, which represented 11.8% of its revenue in 2024. Additionally, the company faces mounting pressure from the e-commerce surge, particularly from budget online retailers like Temu and Shein, says Reuters.
Starting May 2, new U.S. regulations will impose tariffs on purchases that previously qualified for duty-free status under the $800 threshold.
While UPS' first-quarter revenue dipped slightly to $21.5 billion, it still topped analyst expectations of $21.05 billion, according to LSEG data. Revenue for its core U.S. domestic segment rose 1.4% to $14.46 billion, fueled by stronger air cargo performance and an increase in revenue per shipment despite lower overall volumes, says Reuters.
Adjusted earnings per share came in at $1.49, comfortably beating projections of $1.38. UPS, which had earlier estimated 2025 revenue at $89 billion with an operating margin near 10.8%, continues to navigate a volatile logistics landscape as global dynamics shift.
