Package delivery company UPS surpasses Q1 projections, reveals plans to dismiss 20,000 employees in 2021.
In a surprising move, global package delivery giant, United Parcel Service (UPS), reported impressive Q1 results on Tuesday, despite plans to downsize its workforce and shutter numerous facilities. Here's the tea on these game-changing announcements.
UPS Serves Up Beating Q1 Results
With adjusted earnings per share (EPS) of $1.49 and revenue of $21.5 billion, UPS bested analysts' expectations by a yard. They expected adjusted EPS to dip by a couple of cents and revenue to slide around 3%.
Time to Chop the Workforce and Facilities
UPS is expecting to let go of approximately 20,000 employees come this year and close 73 leased and owned properties by June. This restructuring will cost them somewhere between $400 million to $600 million this year, but the company is confident it'll save them $3.5 billion in the long run.
CEO Carol Tomé feels the company will come out stronger and more agile from this overhaul. She stated, "The macro environment may be uncertain, but with our actions, we will emerge as an even stronger, more nimble UPS."
No More Updates on Full-Year Outlook
Citing current macro-economic uncertainty, UPS won’t provide any updates to its previous full-year outlook. They’ll spill the beans on their second-quarter predictions during the earnings call later on Tuesday. In January, UPS shared plans for a revenue of roughly $89 billion for the year, which coincided with several "business and operational changes", including slashing its shipping volume for Amazon by more than half by the second half of 2026.
Sinking Shares
UPS shares made a leap in premarket trading following the impressive Q1 results but slid 1% just after markets opened. These shares have eroded more than 20% of their value by the start of Tuesday. Earlier in the month, shares plunged to their lowest point since mid-2020.
UPDATE-This article now includes the latest share price information and details from UPS' earnings report.
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Why the Big Changes?
- Amazon Volume Reduction: UPS is looking to halve Amazon shipment volumes by late 2026, as Amazon accounted for a hefty 11.8% of UPS's 2024 revenue.
- International Trade Uncertainty: CEO Carol Tome pointed to rising risks from tariffs and slowing international trade as reasons for the companies shifts.
- Optimizing the Network: Streamlining operations by consolidating into fewer, automated facilities aims to reduce physical handling and boost asset utilization.
- $3.5 Billion in 2025 Savings: UPS anticipates saving $3.5 billion annually through job cuts and facility closures. Modernized facilities with autonomous guided vehicles and automated sorting systems increase processing capacity by 30-35%, cutting down on manual labor needs.
(Note: No significant layoffs of this scale from 2022 appear in available records. The referenced actions stem from UPS’s 2025 strategic overhaul.)
[Sources: 1, 2, 5]
- Despite announcing plans for significant layoffs and facility closures, United Parcel Service (UPS) delivered impressive Q1 results, beating analyst estimates for adjusted earnings per share (EPS) and revenue.
- The restructuring initiative, expected to cost UPS between $400 million to $600 million this year, aims to save $3.5 billion in the long run, making the company more nimble and agile.
- In the wake of current economic uncertainty, UPS has chosen not to provide an update on its full-year outlook, planning to discuss second-quarter predictions during the earnings call later in the day.
- UPS shares experienced a surge in premarket trading following the Q1 results but dipped 1% after market open, with the shares having eroded over 20% of their value by the start of Tuesday.
- Key drivers behind UPS's strategic changes include reducing shipment volumes for Amazon, optimizing the network through consolidation, and adopting modern facilities with autonomous guided vehicles and automated sorting systems.
- International trade uncertainty due to rising risks from tariffs and slowing international trade, as well as the desire to reduce Amazon's share of UPS's 2024 revenue (11.8%), are also crucial factors contributing to the company's major shifts.
