UPS Plans to Lay Off 20,000 Workers Amid Amazon Shipment Decline and Economic Uncertainty
UPS drivers wait as their trucks are loaded at a Manhattan UPS facility in New York.
United Parcel Service (UPS), the global logistics giant, has announced plans to lay off 20,000 employees in response to an anticipated drop in Amazon shipments, its largest customer, and to address cost challenges in an uncertain economic climate. This announcement comes even as the company reported better-than-expected earnings for the first quarter of the year.
Strong Financial Performance in Q1
In the first quarter, UPS exceeded market expectations, reporting revenues of $21.5 billion, slightly above Wall Street’s forecast of $21.05 billion. The company achieved a 1.49 USD adjusted earnings per share, beating analysts’ estimates of 1.38 USD per share. The domestic U.S. segment saw a 1.4% increase in revenue to $14.46 billion, driven by stronger air shipments and improved revenue per package, despite a decline in overall shipment volume.
However, the company faces challenges in other areas. Revenue from low-cost e-commerce sellers, such as Temu and Shein, has dropped sharply. This decline is partly due to new U.S. tariffs imposed on goods previously exempt from duties under $800 per transaction, effective May 2.
Workforce Reduction and Cost-Saving Measures
To counter economic headwinds, UPS has launched a series of cost-cutting measures. The company plans to save $3.5 billion by 2025 by reducing its workforce, closing 73 facilities, and increasing automation in its operations. These changes are part of a broader restructuring initiative led by CEO Carol Tomé.
“The steps we are taking to streamline our network and reduce costs across the board come at exactly the right time,” Tomé stated.
The company has also withheld updates to its full-year guidance, citing economic uncertainty. In January, UPS had forecasted annual revenue of $89 billion with an operating profit margin of 10.8%.
Impact of Amazon and Global Trade
Amazon, which accounted for 11.8% of UPS’s total revenue in 2024, remains a critical factor in the company’s financial outlook. In January, UPS announced it was accelerating plans to reduce deliveries for Amazon, anticipating a significant decline in volumes from the e-commerce giant.
Additionally, the global trade slowdown—partly attributed to tariffs introduced during the Trump administration—has further pressured UPS and other parcel delivery companies. The trade deceleration has reduced demand for business-to-business shipping services, prompting firms to reassess their cost structures.
Market Reaction
Following the announcement, UPS shares rose by approximately 2% before the close of Tuesday’s trading session. The company’s proactive approach to cost management and operational efficiency has reassured investors, despite the uncertainties surrounding global trade and customer demand.
Analysts have expressed mixed reactions. Jonathan Chappell, an analyst at Evercore ISI, remarked, “The withdrawal of 2025 guidance introduces a wide range of potential outcomes, making it difficult to provide clarity without better macroeconomic visibility.”
A Strategic Reset
As UPS braces for an evolving market landscape, its strategy reflects the need to balance immediate cost pressures with long-term growth. By restructuring its operations, embracing automation, and recalibrating its customer mix, UPS aims to emerge more resilient in an unpredictable global economy.
With layoffs, facility closures, and changes in trade policies reshaping the logistics industry, the coming years will be critical in determining how UPS adapts to these challenges while maintaining its position as the world’s leading parcel delivery company.
