A Disappointing 2023 for UPS Creates Opportunities for Shippers
Last Updated Feb 2, 2024
This week UPS looked back at its less-than stellar 2023 results in its Q4 earnings call and announced plans to improve its performance this year. First we'll cover the disappointing news for the shipping giant, which remains an enormous force in the US logistics industry, and then we'll dive into what shippers can do to mitigate their risk amidst the volatility.
The big headline is that UPS is laying off 12,000 employees, which will drive $1 billion in cost savings. One look at the financials, and it’s obvious why UPS needs to make these painful cuts:
Consolidated quarterly revenues continued to plummet, down 7.8% — declining to $24.9 billion, from $27 billion in Q4 2022.
Year-over-year, the company’s consolidated operating profit of $2.5 billion represented a 22.5% drop compared to Q4 2022, and it was down 27.1% on an adjusted basis.
Compared to Q4 2022, UPS shipping volumes are down across the board. There was a 7.4% volume decrease for the US domestic market and an 8.3% reduction in the international segment.
The supply chain solutions segment saw a shocking 11.4% revenue drop year-over-year, due to market rate declines and excess capacity in forwarding.
“2023 was a unique, and quite candidly, difficult and disappointing year. We experienced declines in volume, revenue and operating profits and all three of our business segments,” CEO Carol Tomé said during the earnings call. While Tomé did not mention the financial impact of its narrowly averted labor strike over the summer, the resulting higher wages were certainly a factor in end-of-year profitability.
But the company’s top line was also down last year. Looking at the full year, UPS revenue for 2023 was $91.0 billion, a decrease of 9.3% from 2022. The company estimates slight revenue growth for 2024, in the range of $92.0 billion to $94.5 billion — which is below the forecasts of industry analysts.
What Does This News Mean for Shippers?
The financial performance of UPS serves as a bellwether not only for the US freight market, but also the national economy. So, its continued decline is not good news for anyone.
The fact remains, however, that shippers are kicking off 2024 with a unique opportunity to capitalize on low shipping volumes to negotiate better contracts and rates with UPS. With very modest revenue gains projected for 2024, along with current low volumes, the shipping giant is looking for business. UPS may be more open than ever to rate flexibility and positive negotiation.
Let’s be clear: UPS is a powerhouse in the logistics industry and its financial results will certainly stabilize over time. But this is a great time for shippers to take a proactive approach to improving their own business performance.
Not Sure Where to Start? Let Us Help.
If you’re reluctant, or unsure where to begin, no one is more qualified to help you than Redwood.
We manage over $5.5B in freight for a wide range of customers, which means our team offers industry-leading expertise and hands-on experience in optimizing shipping costs and negotiating favorable rates. Our Parcel Advisory team, which includes former major parcel carrier employees, creates a significant competitive advantage for your business as we coach you in rate negotiation, carrier pricing and contracts. In addition, our proprietary Redwood Parcel solution is an all-in-one execution toolkit that helps you optimize and automate all your parcel shipping activities, saving time and costs.
If you ship parcel, and you’re looking to boost your own 2024 financial results, now is the time to act. Start by reaching out to Redwood today.