UPS to Cut 12,000 Jobs, Explore Sale of Coyote Amid Weak Q4

During the COVID-19 pandemic, UPS' head count soared to more than 540,000 employees. By the end of 2023, it had lowered its staffing size to 495,000 through attrition and flying its cargo planes fewer hours rather than layoffs. (Richard Drew/AP file)

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UPS Inc. is reducing its overall employee head count by 12,000 workers, which the company says will save more than $1 billion, citing higher labor costs and softening demand.

The company made the announcement on an earnings call with reporters and financial analysts Jan. 30 before the opening bell on Wall Street. The Atlanta-based package delivery giant also said its quarterly profits topped analysts’ forecasts for the sixth consecutive quarter, even as overall revenue declined.

“2023 was a unique and difficult year,” CEO Carol Tomé said. “Through it all, we remained focused on controlling what we could control, stayed on strategy and strengthened our foundation for future growth.”

During the COVID-19 pandemic, the company’s employee head count soared to more than 540,000 employees in more than 200 countries and territories. By the end of 2023, it had lowered its staffing size to 495,000 through attrition and flying its cargo planes fewer hours rather than layoffs. The company has an estimated 85,000 salaried employees.

“It’s a change in the way we work,” Chief Financial Officer Brian Newman said. “So as volume returns to the system, we don’t expect these jobs to come back. It’s changing the effective way that we operate.”

The company said the staff cuts mostly will be in the management and contractor ranks.

Higher labor costs are impacting the company’s financial picture. In late 2023, members of the Teamsters union approved a five-year contract for its 340,000 members that put the final seal on months of often contentious labor negotiations that threatened to disrupt package deliveries for millions of businesses and households.

The agreement got the company labor peace, but the union said delivery drivers and package handlers would see a $30 billion increase during the contract in wages and benefits. The highest-paid UPS drivers will make more than $170,000 annually at the end of the contract.

“Some of this performance was due to the macro environment and some due to disruptions associated with our labor contract negotiations as well as higher costs associated with the new contract,” Tomé said.

Tomé also said the company planned to ask its employees to return to the office five days a week this year.

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In addition, the company said it is exploring the sale of its Coyote truck brokerage business. The division has seen sales plummet amid a freight recession marked by declining rates and overcapacity.

She described Coyote’s business model as “highly cyclical” with considerable earnings volatility. UPS acquired the Chicago-based company for $1.8 billion in 2015.

UPS ranks No. 1 on the Transport Topics Top 100 list of the largest for-hire carriers in North America, and No. 4 on the TT 100 list of North America's largest logistics companies. Coyote Logistics ranks No. 3 on the TT Top Freight Brokerage Firms list.

UPS lost business in 2023 as customers concerned about a possible strike by the Teamsters shifted shipments to rival carriers, such as FedEx Corp. But Tomé said UPS has won back nearly 60% of the shipping volume it lost.

The company also said moving packages for Amazon.com Inc. has increased and now represents 11.8% of its revenue in 2023, up from 11.3% in 2022. That figure reversed a trend, as UPS was reducing its dependence on Amazon, which often negotiates discounts on its shipping.

For the past several years, UPS said it was focusing on boosting efficiency and shifting to higher-profit deliveries, such as medical supplies.

“We are going to fit our organization to our strategy and align our resources against what’s wildly important,” Tomé said. “It’s a change in the way we work.”

In its financial report, UPS said it bumped up its dividend by a penny a share.

Quarterly net income was more than halved to $1.61 billion, or $1.88 a share, from $3.45 billion, $3.96, in the same period a year ago.

UPS reported net income of $6.7 billion, or $7.81 a share, for all of 2023.

Excluding nonrecurring items, UPS said its adjusted earnings per share was $2.47. The average estimate of 10 analysts surveyed by Zacks Investment Research was $2.44.

Fourth-quarter revenue fell 7.8% to $24.9 billion, missing the consensus estimate of $25.4 billion.

For the year, UPS reported revenue of $91 billion, a decrease of 9.3% compared with 2022.

During the pandemic, when consumers were spending at record levels, UPS saw its business surge, and revenue topped $100 billion for the first time. Tomé acknowledged the company won’t hit that benchmark again anytime soon, calling it “candidly difficult and disappointing.”

UPS said it expects 2024 revenue of $92 billion to $94.5 billion, which is below the FactSet consensus of $95.51 billion.

UPS reported a 7.4% drop in average daily volume domestically and an 8.3% decrease internationally. Tomé said the international softness was “heavily weighted” in Europe, coupled with freight complications in the Red Sea region as military action there heats up in the Suez Canal area. Also a concern is the ongoing low water level of the Panama Canal.