- UPS beats Q1 profit expectations and announces a major cost-reduction plan involving 20,000 job cuts.
- Company to save $3.5 billion in 2025 by closing 73 facilities and increasing automation.
- Faces volume slowdown from Amazon, Temu, and Shein, but maintains resilient earnings.
United Parcel Service (UPS) is making bold moves to navigate economic turbulence and shifting customer demand. The parcel delivery giant stunned Wall Street with stronger-than-expected Q1 earnings, but what truly caught investors’ attention was a cost-cutting plan designed to save $3.5 billion in 2025.
This ambitious strategy includes cutting 20,000 jobs, shuttering dozens of facilities, and optimizing operations amid a changing logistics landscape. The announcement pushed UPS shares nearly 2% higher in pre-market trading as investors welcomed its forward-thinking approach.
UPS’ Cost-Cutting Plan Aims for a Leaner Future
UPS is not waiting for a recovery to act. Instead, it’s taking a proactive cost-cutting approach, announcing it will eliminate 20,000 jobs and close 73 buildings by mid-2025. The Atlanta-based company said this transformation will not only reduce overhead but also prepare the business for lower volumes from key clients, particularly Amazon.
CEO Carol Tomé emphasized the urgency: “The actions we are taking to reconfigure our network and reduce cost across our business could not be timelier.”
The cost-cutting efforts will include building closures, increased automation, and selective asset sales. UPS expects to incur expenses between $400 million to $600 million in 2025 related to employee separation and lease terminations, but the long-term savings are expected to far outweigh the short-term impact.
Why Cost-Cutting is Crucial for UPS Right Now
UPS is navigating a highly uncertain economic environment, made more complex by trade-related tariffs and waning demand from large e-commerce partners like Amazon, which accounted for nearly 12% of its revenue last year. Additionally, upcoming U.S. tariffs on goods from low-cost online sellers like Temu and Shein could reduce shipping volumes even further.
With the removal of its 2025 financial guidance due to macroeconomic unpredictability, UPS’ cost-cutting strategy becomes even more critical. Analysts agree the move makes sense, though it introduces a range of possible outcomes. “The removal of 2025 guidance will likely create a wide range of outcomes that may be difficult to underwrite without greater macro clarity,” said Jonathan Chappell of Evercore ISI.
Still, investors are backing the plan, encouraged by UPS’ ability to protect profitability in the face of strong headwinds.
Earnings Resilience Amid Volume Declines
UPS posted a first-quarter adjusted profit of $1.49 per share, beating expectations of $1.38. While overall revenue dipped slightly to $21.5 billion, it exceeded Wall Street’s estimate of $21.05 billion.
Its U.S. domestic segment saw a 1.4% increase in revenue, driven by improving revenue per piece and strong performance in air cargo. This performance was achieved despite declining volumes, showing UPS can still thrive while transforming its operations.
The firm had previously forecast full-year revenue of $89 billion with an operating margin of 10.8%. Although it has paused updates to that outlook, the strategic cost-cutting plan should help it stay on course.
Cost-Cutting Plan Gives UPS Long-Term Stability
UPS has shown time and again that it can adapt to change. The new cost-cutting plan reflects a forward-looking strategy that strengthens its position as the world’s largest package delivery company. By right-sizing its workforce, embracing automation, and closing underutilized facilities, UPS is streamlining its operations to better meet the demands of a rapidly evolving logistics market.
With $3.5 billion in anticipated savings and continued profitability, UPS is well-positioned to emerge from this economic cycle stronger and leaner.
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