United Parcel Service (UPS) announced that it will lay off 12,000 employees with the aim of aligning resources by 2024. This move comes in response to a “disappointing” 2023 financial year, which saw declines in revenue, volume, and operating profits across all three of the company’s business segments. The layoffs are estimated to save the company about $1 billion in costs, CEO Carol Tomé shared during the recent earnings call.
UPS’s revenue for the last three months of 2023 declined by 7.8% to $24.9 billion, down from $27 billion over the same period last year. The company reported a 7.4% drop in average daily volume domestically and an 8.3% decrease internationally. According to Tomé, international softness was “heavily weighted” in Europe and was compounded by freight problems in the Red Sea, Panama, and Suez canals.
Although the earnings report made no direct mention of the financial impacts of negotiations with Teamsters in August regarding labor contracts, Tomé cited the negotiations and the broader macroeconomic environment as contributing to a “disappointing” year.
The company is also reportedly considering selling its Coyote truck brokerage business. The CEO described it as a “highly cyclical” business with “considerable earnings volatility.” Additionally, UPS is planning to ask workers to return to the office five days a week in 2024, a move that will likely have a significant impact on its workforce.
In response to the news, shares of the package giant dipped about 7% in early trading, indicating some investor concern. However, Tomé has emphasized that the layoffs and other initiatives are part of a broader, long-term effort to position the company for success in the future. With plans to save $1 billion and streamline operations by 2024, UPS is working to adapt and thrive in an ever-changing market.