UPS Cuts Financial Outlook in Q2 Amid Tentative Deal with Teamsters
Package diversions to other carriers during Q2 lead UPS to cut its financial outlook for the year; UPS expects to win back its lost business by the end of the year
Amid the tentative agreement that UPS struck with the Teamsters union representing 340,000 workers at the carrier, UPS cut its financial outlook for the year. The potential strike caused a portion of UPS shippers to rely on other carriers in the U.S. for their shipping needs during Q2 of 2023. As a result, UPS reported an adjusted income of $2.2 billion in the second quarter, a figure that represents a 24% decrease from the same period last year. Revenue during Q2 also fell by 11% to $22.1 billion.
UPS CEO Carol Tome Weighs in On the Company’s Financial Outlook
During an earnings call this week, UPS CEO Carol Tome said that the company “experienced more volume diversion than we anticipated.” According to Tome, about one-third of the diverted shipments went to FedEx, a third went to USPS, and a third went to regional shipping carriers like OnTrac and LaserShip. Tome said about 1 million packages a day were diverted to those other carriers during Q2.
Despite the fact that average daily package volume fell by 9.9% in the second quarter, Tome noted that the amount of revenue the company earned per package increased by 3.3%. Tome also said that the company is already working to win back the business that was diverted to other carriers, adding the company thinks that “by the end of the year, we’ll win it all back.”
Can UPS Win Back its Business?
The last time UPS workers went on strike was in 1997. According to ShipMatrix, an analytics firm that works with logistics companies and carriers, UPS was able to recapture 90% of its diverted business once that strike ended. However, in today’s climate, analysts have said that UPS might be able to only recover 70% of the business it lost from the potential strike due to the fact that business shippers and individuals have a greater number of alternatives.
What Happens Next?
UPS reached a tentative deal with the Teamsters on July 25th, days before the deadline of August 1st that the Teamsters union had voted to start striking. The 340,000 members of the union who work at UPS are currently voting on whether or not to ratify the deal. Results from the votes are expected on or before August 22nd.
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