UPS Shifts Strategy With Amazon Exit, SMB Push Amid Cost Cuts

Core Insights - UPS is undergoing significant restructuring to enhance long-term profitability amid a challenging macro environment, focusing on controlling internal factors and executing strategic initiatives [1][4][12] Operational Changes - The company plans to close 164 operations and 73 buildings by the end of June to eliminate redundant infrastructure and realign capacity with demand [2] - UPS expects to reduce operational hours by approximately 25 million and cut around 20,000 positions, while continuing investments in automation and technology [3] - A planned volume reduction from Amazon is expected to exceed 50% by June 2026, reflecting a shift away from low-margin accounts [3][4] Financial Performance - UPS' first-quarter U.S. domestic revenue rose 1.4% to $14.5 billion, driven by air cargo increases and a 4.5% rise in revenue per piece, marking the strongest growth rate in eight quarters [6] - International revenue increased 2.7% to $4.4 billion, supported by a 7.1% rise in average daily volume, although non-GAAP operating profit fell 4.1% due to shifts toward more economical services [7] Strategic Initiatives - Under the "Efficiency Reimagined" initiative, UPS aims for $1 billion in savings in 2025 and a total of $3.5 billion in cost reductions by year-end [6] - New services like SurePost Final Mile delivery and Ground Saver are being introduced to enhance competitive positioning and cater to cost-conscious customers [10][11] - The acquisition of Andlauer Healthcare Group is intended to strengthen UPS' healthcare logistics capabilities, addressing a growing segment in global supply chains [11] Market Dynamics - SMBs now account for 31.2% of total U.S. volume, diversifying UPS' customer base away from major retailers [5] - The company is closely monitoring potential trade policy adjustments, particularly in the U.S.-China corridor, with international revenues expected to decline about 2% due to weakening demand [8]