UPS cuts revenue, margin forecasts as labor turmoil dents shipping volumes
By Priyamvada C and Lisa Baertlein
(Reuters) -United Parcel Service (N:UPS) cut its full-year revenue and profitability targets on Tuesday on the back of a slump in shipments due to labor turmoil in its U.S. business, sending shares of the world's largest package deliverer down more than 2%.
UPS reached a tentative five-year deal for some 340,000 U.S. employees represented by the International Brotherhood of Teamsters union shortly before the July 31 contract expiration. As the union threatened to strike, customers diverted more shipments than expected to rivals, UPS CEO Carol Tome said on a conference call with analysts.
Customers shifted about 1 million packages per day to other providers, resulting in about $200 million of lost sales. Data suggests the U.S. Postal Service, FedEx (NYSE:FDX) and regional rivals each picked up about one-third of that business, Tome said.
«It's all hands on deck to get back the volume that was diverted as a result of the negotiations,» she said.
Voting by employees on whether to ratify the handshake agreement wraps up on Aug. 22. The deal includes wage hikes, ends a two-tier wage system for delivery drivers, adds one paid holiday and begins installing air conditioning in new delivery trucks next year. UPS retained flexibility for weekend service, temporary holiday workers and technology adoption.
UPS shares were down about 2.8% in mid-morning trading, while shares in rival FedEx were up more than 1%.
Atlanta-based UPS said it would lay out labor costs from the deal after it is ratified by employees.
UPS, often seen as a bellwether for the U.S. economy, and other logistics companies are facing a global shipping demand slump from soft e-commerce and weak export and industrial production
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