UPS Workforce Major Disruption: 8% Stock Increase

UPS (United Parcel Service) saw its stock price rise by up to 8% on Tuesday following significant workforce cuts. The company's third-quarter financial results surpassed both revenue and profit expectations, with reports indicating that UPS parted ways with approximately 48,000 employees in the first nine months of the year.

It was noted that 34,000 of these cuts were aimed at operational job positions, implemented under the Efficiency Reimagined initiative, while 14,000 positions were particularly in management levels, as part of the Fit to Serve plan. The company stated that the total expected savings from these measures is $3.5 billion.

At the end of last year, UPS operated with 490,000 employees, of which 78,000 were in management positions. The company's CEO, Carol Tomé, told investors, "UPS is executing the most significant strategic change in the history of our company. We’re focusing on winning the most important points, acquiring valuable market pieces, and serving customers with increasingly complex logistics needs."

Some of the layoffs were associated with a reduction in the partnership with Amazon, signaling a move towards the e-commerce retailer establishing its own delivery network. It was indicated that Amazon’s total volumes this quarter fell by 21.2% compared to the previous year, a more pronounced decline than the 13% drop experienced in the first half of the year. UPS plans to cut its shipping volumes with Amazon by more than half by 2026.

As a result of the changes across its U.S. network, the company made the decision to close 19 additional facilities during the quarter. With this, the total number of facilities closed in 2023 reached 93. Tomé noted that alongside cost-cutting plans, uncertainties about tariffs have "somewhat resolved." UPS expects its revenue for the current quarter to be $24 billion, a figure above the $21.4 billion revenue from the previous quarter.

Traditionally, UPS is considered a close indicator of economic developments. However, Bank of America analyst Ken Hoexter remarked that the latest results offered a challenging comparison to last year or previous periods, stating, "Demand is not improving. It is almost flat, and in this situation, companies are trying to cut costs even more aggressively."

Wall Street was optimistic following Tuesday’s news, yet the stock continues to show over a 20% drop year-to-date, which is below competitor FedEx’s (%10) and the S&P 500 index’s (%17) declines.