UPS Flashes Warning Sign for the Direction of the US Economy

A United Parcel Service (UPS) truck leaves the yard in Chicago, Illinois, on Oct. 29, 2010. (Frank Polich/Getty Images)

Global shipping company UPS said Tuesday that the U.S. economy is slowing down as its revenue fell 6 percent in the first quarter compared to a year earlier.

The company’s operating profit, it said, also fell about 22 percent. Its earnings also fell short of Wall Street forecasts for the quarter, according to Reuters.

“In the first quarter, deceleration in U.S. retail sales resulted in lower volume than we anticipated, and we faced ongoing demand weakness in Asia,” said the Atlanta-based firm in an earnings statement. “Given current macro conditions, we expect volume to remain under pressure. We will remain focused on driving productivity while investing in efficiency and growth initiatives, enabling us to come out of this demand cycle even stronger.”

Shares of rival FedEx Corp fell 3 percent, while trucking firms J.B. Hunt Transport, and Old Dominion Freight Line Inc. slipped between about 1 percent and 3 percent. Most delivery firms are struggling with a bloated delivery capacity as online sales that had peaked during the pandemic started to fizzle as high inflation dented discretionary spending.

“U.S. discretionary sales are lagging grocery and consumable sales, and disposable income is shifting away from goods to services,” CEO Carol Tomé said during a conference call with analysts, Reuters reported.

Shares of UPS fell 9.26 percent as of Tuesday afternoon and were set for the worst day since early 2015 if losses held, after the company also forecast full-year revenue of about $97 billion, at the lower end of its prior forecast of $97 billion to $99.4 billion, compared with analysts’ estimates of $98.14 billion. UPS reported an adjusted profit of $2.20 per share in the first quarter, compared with analysts’ average estimate of $2.21.

Besides a slowing-down economy, the company is also involved in contract negotiations with the Teamsters, a union that represents 340,000 UPS employees in the United States, according to the union. The company has an Aug. 1 contract expiration with the union, meaning that its members could go on strike if no deal is reached.

“While we expect to hear a great deal of noise during the negotiations, I remain confident that a win-win-win contract is very achievable and that UPS and the Teamsters will reach agreement by the end of July,” Tome told analysts, according to CNN. “Like any negotiations… there’s going to be bumps along the way.”

Earlier this month, the Teamsters released a statement signaling the union has a less-than-optimistic outlook.

“This is not a game. But you wouldn’t know that based on UPS’s behavior,” Teamsters General President Sean O’Brien said in a statement. “The livelihoods of our members are at stake. UPS delays, disappears, drags its feet, and refuses to talk about the real issues that workers need addressed. The Teamsters aren’t going to stand for it.”

Reuters contributed to this report.