STORY: Shares of UPS tumbled on Tuesday after the company missed second-quarter earnings estimates and lowered its operating margin target for this year.
The world’s biggest package delivery firm is seen as a bellwether for the global economy.
UPS cited the margin squeeze as coming from new e-commerce sites that flooded its network with orders for lower-profit deliveries.
The company declined to name the new customers, but its description of them as well-known shippers with “explosive” volume matches the profiles of Shein and Temu, which sell low-cost clothing and other goods from Chinese factories.
UPS said orders from such firms were much higher than anticipated, and led to a shift away from its premium air service to its less expensive ground service…
and even to its more economical SurePost services, where UPS picks up packages and hands them off to the U.S. Postal Service for final delivery.
Demand for higher cost doorstep package delivery has been lackluster since the end of the pandemic lockdowns.
UPS, FedEx and other home delivery providers have responded by slashing jobs, parking planes and rooting out other expenses.
UPS will replace FedEx as the primary air cargo provider for the U.S. Postal Service in October, and expects cost pressures to ease in the second half of the year.
Source Agencies
