UPS experiences record decline despite strong package volume

The increasing trend of US consumers favoring more affordable e-commerce platforms led to a significant surge in shipment volume for UPS in the second quarter. Despite this increase, the parcel service provider recorded a profit nearly one-third lower. Company CEO Carol Tomé told analysts on Tuesday that many customers switched to lower-cost services in the past quarter. Specifically, new e-commerce providers increasingly relied on SurePost, one of UPS's more economical services. The company's shares experienced a record plunge, closing down 12 percent at $127.68 – the lowest level in four years. While Tomé did not name the two new e-commerce companies using UPS's network, she hinted that they were similar in profile to Chinese online retailers Shein and Temu. CFO Brian Newman added that UPS had intentionally integrated the e-commerce groups into its network. The trend towards affordable products is evident as shippers increasingly opt for cheaper ground transportation and the SurePost service instead of air freight, said Tomé. Additionally, there was a sharp increase in light, short-distance shipments. The Atlanta-based parcel and delivery company, considered an economic barometer, reported a 30.1 percent decline in operating profit in the second quarter compared to the same period last year. Revenues decreased by 1.1 percent year-over-year. UPS revised its forecast for the adjusted operating margin to about 9.4 percent, compared to a previous range of 10 to 10.6 percent published three months ago. Earlier this year, UPS announced it would cut 12,000 jobs to save $1 billion after an expensive labor agreement with the Teamsters union. The recent results reflected the "pre-loading of costs associated with our new labor agreement," the executives said. Additionally, the company had to pay a one-time international regulatory fee of $94 million in the second quarter.