Date: Wednesday, April 26, 2023
Source: Wall Street Journal
United Parcel Service Inc. shares tumbled on Tuesday after the global shipping giant said decelerating U.S. retail sales and shifting consumer trends would depress the company’s shipping volumes this year.
The carrier is forecasting its first decline in annual revenue since 2009 after earnings and revenue both fell in the first quarter from a year ago, declines UPS said were driven by sagging consumer spending that pushed fewer packages through its U.S. and international networks.
The company said in its first-quarter earnings report that it now expects full-year revenue to come in at around $97 billion, at the low end of earlier guidance and about 3% behind revenue during 2022.
“Given current macro conditions, we expect volume to remain under pressure,” Chief Executive Carol Tomé said. “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 fell just short of 10% in trading Tuesday, to $176.29, close to the low point for the year so far.
U.S. retail sales fell in both February and March, according to the Commerce Department, one of several signs that higher interest rates are slowing the economy.
Ms. Tomé said on a conference call that U.S. volumes held up better than the company expected in January, but deteriorated in March. She said consumers began to spend more on food and groceries and less on goods that UPS helps deliver.
“U.S. discretionary sales are lagging grocery and consumable sales, and disposable income is shifting away from goods to services,” she said, adding that volume has held roughly steady since the end of March.
Atlanta-based UPS reported first-quarter earnings of $1.9 billion, or $2.19 a share, compared with $2.66 billion, or $3.03 a share, in the same period a year earlier. Stripping out one-time items, adjusted earnings came to $2.20 a share, matching analysts’ expectations, according to FactSet.
Overall revenue fell 6% from the year-ago quarter, to $22.9 billion.
The volume declines were steepest in the premium domestic U.S. express segments, with next-day air shipments falling 10.7% and deferred services dropping 24.5% from the first quarter of 2022. UPS partly made up for the declining volume with stronger pricing, as average revenue per domestic package increased 4.8 from last year.