United Parcel Service Inc. reported profits and revenue were down for the second quarter ended June 30. UPS consolidated revenue declined 10.9% year over year to $22.1 billion in the quarter. Consolidated operating profit declined 21.4% in the same period, to $2.8 billion.
Package volume declined
Revenue was down in part because package volume declined in the quarter, UPS says. Total average daily package volume dropped 9.9% in the quarter compared with 2022. In June, volumes were even lower, down 12.2% over 2022.
Though there were declines across all sectors using UPS, retail and tech marked the largest drops, UPS says. B2C average daily volume declined 11.5%. B2B volumes fared a bit better, down 7.7%.
Air transportation amounted to most of the decline, per UPS. Average daily volume was down 16.5%, compared with 8.6% for ground shipping.
UPS is used by more retailers in Digital Commerce 360’s Top 1000 online retailers than any other carrier.
Impacts of the new labor contract
UPS reached an agreement with the Teamsters union in July, covering 340,000 member employees. Part of the reduced package volume in the quarter was due to “noise levels around our labor negotiations,” chief financial officer Brian Newman told investors in an earnings call. UPS estimates that customers switching to other carriers ahead of the looming strike cut down about 1.2 million packages per day.
UPS also adjusted its outlook for the rest of 2023 following the deal, which raised the average compensation of a full-time driver to $170,000 by the end of the five-year contract. The package carrier reduced its 2023 revenue outlook from $97 billion to $93 billion “primarily to reflect the volume impact from labor negotiations and the costs associated with the tentative agreement reached with the International Brotherhood of Teamsters.”
Demand for package delivery from ecommerce retailers is “stable to improving in the U.S.,” Newman said in the call, and “obviously, under some more pressure internationally.”
Ecommerce “blew up” during the pandemic, CEO Carol Tome said.
“And so now everything is kind of reverting back to where it was before COVID. We see that around the globe, which makes sense,” she told investors.
For the fiscal second quarter ended June 30, 2023, UPS reported:
- Consolidated revenue declined 10.9% to $22.1 billion.
- Consolidated operating profit was down 21.4% to $2.8 billion.
- UPS average daily package volume declined 9.9%.
For the six months ended June 30, 2023, UPS reported:
- Total revenue declined 8.5% to $44.98 billion.
- Total operating profit was down 20.5% to $5.47 billion.
Percentage changes may not align exactly with dollar figures due to rounding.
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