Apr 25, 2023 - Economy & Business

UPS package volume drops as retail sales deal blow

Delivery trucks parked outside a UPS hub in the Brooklyn borough of New York, US, on Friday, April 21. Photo: Paul Frangipane/Bloomberg via Getty Images

Slumping package volume triggered a decline in UPS revenue as the shipping service felt the effects of slowing retail spending.

Driving the news: UPS said Tuesday that its domestic package volume was down 5.4% in the first quarter, compared with a year earlier — worse than Goldman Sachs' estimate of a 3.3% decline.

  • Customers displayed a pattern of trading down to cheaper options, Goldman analyst Jordan Alliger noted.
  • Overall revenue fell 6% to $22.9 billion — and the company projected full-year revenue of $97 billion, marking the low end of its January guidance.

What they're saying: “Volume was higher than we expected in January, close to our plan in February and then moved significantly lower than our plan in March, as retail sales contracted, and we saw a shift in consumer spending," CEO Carol Tome said on an earnings call.

  • "U.S. discretionary sales are lagging grocery and consumable sales, and disposable income is shifting away from goods to services," Tome added.

The impact: UPS shares closed down 10.1% Tuesday.

  • That's the biggest one-day drop since at least 2015, Bloomberg reported.

What's next: UPS recently began contract renewal negotiations with the International Brotherhood of Teamsters, whose deal expires in July.

  • Tome said the union and company are "aligned on several key issues like solving the staffing needs for weekend delivery and ways to mitigate the summer heat in our package delivery vehicle."
  • "While we expect to hear a great deal of noise during the negotiation, I remain confident that a win-win-win contract is very achievable and that UPS and the Teamsters will reach agreement by the end of July."
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