Shares in United Parcel Serice (UPS) slumped by 13% during midday trading on Tuesday after the company reported lower-than-expected second-quarter financial results. Adjusted profit per share was $1.79, missing analysts’ estimates of $1.99 per share according to data from LSEG. The company lowered its full-year adjusted operating margin forecast as a result, from a range of 10.0% to 10.6% to 9.4%.
UPS’s lower profits were largely driven by a change in strategy by e-commerce platforms Shein and Temu, which use UPS to deliver their packages. Believed to send a combined 600,000 packages to U.S. customers every day, Shein and Temu have resorted to sending packages via slower, lower-profit shipments. Choosing the lowest-cost delivery option has stunted UPS’s air cargo business as well as its express delivery business.
As a result of the company’s recent financial struggles, UPS decided to slash 11,500 jobs, thereby cutting costs by around $1 billion. “We have shown that we can drive costs out and we can continue to do that,” CEO Carol Tome insisted, adding that the courier company expects cost pressures to ease during the second half of the year. Tome explained that UPS remains focused on increasing its higher-margin volume, including corporate deliveries and temperature-controlled healthcare shipments.