United Parcel Service Inc. reported profits and revenue declined in its fiscal third quarter ended Sept. 30, 2023. UPS consolidated revenue declined 12.8% from the year-ago period to $21.1 billion. Consolidated operating profit declined 48.7% over the same period to $1.3 billion.
Why is UPS volume down?
UPS attributed much of the decline in revenue and profit to lower package volume and impacts of labor negotiations. It reached an agreement with the Teamsters union in July to renew a five year contract and stave off a strike. The agreement was fully ratified in August.
Average daily volume declined 11.5% in the quarter, which was slightly offset by a 2% increase in revenue per piece. August was the most difficult month by volume levels, with some clients waiting until the union contract was ratified to start using UPS again.
In the last week of September, daily volume was down just 7.4% year over year, an improvement from the rest of the quarter, says Carol Tome, CEO, in a press release.
“While unfavorable macro-economic conditions negatively impacted global demand in the quarter, our U.S. labor contract was fully ratified … and volume that diverted during our labor negotiations is starting to return to our network,” Tome told investors in an earnings call.
Ecommerce and Happy Returns acquisition
Ecommerce returns have been a “key area of growth” for UPS over the last several years, Tome said. It has grown 25% since 2020.
That was the impetus behind UPS acquiring reverse logistics company Happy Returns. Happy Returns will “generate profitable B2B volume, and help drive pickup and delivery density,” Tome said in the call.
UPS holiday shipping outlook
UPS is preparing for its busiest part of the year, the fourth quarter holiday season. It plans to hire 100,000 seasonal workers to process and deliver packages during the peak season.
Despite slowing demand, UPS expects to see “healthy” volumes during peak season. But there are headwinds, the retailer warns. Consumers are returning to stores and not doing as much of their shopping online, or spending more on experiences, which is also hurting UPS package volume, Tome said.
UPS adjusted its 2023 outlook to expect consolidated revenue for the year to reach $91.3 billion to $92.3 billion. That’s down slightly from the anticipated $93 billion UPS gave in Q2.
UPS quarterly earnings
For the fiscal third quarter ended Sept. 30, 2023, UPS reported:
- Consolidated revenue declined 12.8% to $21.1 billion.
- Consolidated operating profit declined 48.7% to $1.3 billion.
- UPS average daily package volume declined 11.5%.
For the nine months ended Sept. 30, 2023, UPS reported:
- Total revenue declined 9.9% to $66.0 billion.
- Total operating profit decreased 29.4% to $7.1 billion.
Percentage changes may not align exactly with dollar figures due to rounding.
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