United Parcel Service (UPS), the global parcel delivery leader, reported first-quarter earnings that surpassed Wall Street expectations for profit. However, the company also unveiled a plan to eliminate 20,000 jobs globally, citing the need to reduce costs in the face of an uncertain economic environment and anticipated decreased shipping volumes, particularly from key customers like Amazon. The announcement led to UPS shares rising nearly 2% in premarket trading on Tuesday.
First Quarter Financial Highlights
UPS delivered an adjusted profit of $1.49 per share for the first quarter, outperforming analyst forecasts of $1.38 per share. While the company’s total revenue for the quarter saw a slight decline to $21.5 billion, it still managed to exceed the $21.05 billion expected by analysts, according to data from LSEG.
Driving Cost Efficiency Through Job Cuts
The planned workforce reduction of 20,000 jobs is a major component of UPS’s strategy to enhance efficiency and lower its operating expenses. The company aims to achieve cost savings of approximately $3.5 billion during 2025 through these job cuts and by consolidating its physical footprint, which includes closing 73 leased and owned facilities by the end of June.
This follows a previous reduction of 12,000 jobs implemented in the past year. UPS estimates that expenses related to severance benefits and lease terminations in 2025 will range between $400 million and $600 million.
Anticipating Lower Shipping Volumes
A primary factor driving the need for cost reductions is UPS’s expectation of declining package volumes. The company foresees reduced shipping activity from its largest client, Amazon, which represented a significant portion (11.8%) of UPS’s overall revenue in 2024. Plans to scale back the number of deliveries handled for Amazon are being accelerated.
Furthermore, UPS anticipates a sharp decrease in volume from online discount retailers like Temu and Shein, stemming from a new U.S. policy, effective May 2, that will impose tariffs on goods valued up to $800 that were previously duty-free.
Outlook Remains Unchanged Amid Uncertainty
Despite the significant cost-saving measures being implemented, UPS stated it is not updating its full-year financial outlook at this time, citing the prevailing economic uncertainty. Evercore ISI analyst Jonathan Chappell commented on this decision, suggesting that the absence of updated guidance creates a wider range of potential outcomes that are challenging to predict without better macroeconomic clarity. Earlier in January, the package delivery firm had projected full-year revenue of $89 billion and an operating margin around 10.8%.
Performance in U.S. Domestic Segment
Within the United States, UPS’s domestic segment recorded revenue growth of 1.4% in the first quarter, reaching $14.46 billion. This growth was supported by increased air cargo movements and improved revenue generated per package, even as the overall volume in this segment experienced a decline.
UPS CEO Carol Tome highlighted the timing of these actions, stating that the efforts to “reconfigure our network and reduce cost across our business could not be timelier.”
