United Parcel Service (UPS) announced on Thursday a revision to its 2023 revenue forecast, citing a dip in e-commerce delivery demand. This development led to a more than 2% drop in the company’s shares prior to market opening. The Atlanta-based corporation finds itself navigating a profit crunch in the aftermath of contract negotiations with its Teamsters-represented workforce.
The company has revised its annual revenue projections to a range of $91.3 billion to $92.3 billion, down from the previous estimate of approximately $93 billion. Additionally, UPS has trimmed its adjusted operating margin forecast to a range between 10.8% and 11.3%, compared to the earlier projection of around 11.8%. This move comes as the package delivery titan contends with diminished demand for e-commerce deliveries and a logistics sector teeming with competition.
Earlier this month, it was reported that UPS, along with its industry peers, resorted to offering discounts and other incentives, marking a departure from past practices, in a bid to safeguard and expand their market share.
In response to the development, UPS CEO Carol Tomé remarked, “While unfavorable macro-economic conditions negatively impacted global demand in the quarter, our US labor contract was fully ratified in early September and volume that diverted during our labor negotiations is starting to return to our network.”
To mitigate losses stemming from declining e-commerce demand, weakened export and industrial production, as well as the cost implications of the new labor contract, UPS has undertaken staff reductions and harnessed technology.
For the quarter ending in September, the corporation reported an adjusted profit per share of $1.57, surpassing the average estimate of $1.52 as per data from the London Stock Exchange Group (LSEG).
As a bellwether for the US economy, UPS, alongside fellow logistics entities, is engaged in a race to align costs with the resurgence of global demand to pre-pandemic levels. Given its status as the world’s largest package delivery provider, UPS faces the imperative of regaining customers who shifted to competitors during the turbulent negotiations.
In conclusion, the revised revenue forecast of UPS underscores the company’s strategic adaptability in the face of evolving market conditions, as it navigates the delicate balance between sustaining profitability and meeting the demands of a dynamic e-commerce landscape.
Source: Reuters
