UPS , announced a tectonic shift in the marriage with its largest client, Amazon, prompting a strong stock price fall Thursday morning.
The , Georgia-based logistics company will reduce the amount it moves for the dealer by more than 50 % by the second quarter 2026, a shift business leaders say reflects UPS ‘ new strategy, or as CFO , Brian Dykes , put it,” the largest network reconfiguration in our history”.
The news and the company’s resulting lower-than-expected revenue forecast for 2025 prompted its share price to drop to its lowest point , since , 2020 on Thursday morning.
UPS , said , it expects to bring in$ 89 billion in 2025 — below the , average , of analysts ‘ revenue estimate of$ 95 billion, and below 2024’s revenue of about$ 91 billion.
In a call Thursday, CEO , Carol Tomé , tried to assure analysts that the news is part of the company’s “better not bigger” strategy that will pay off in the years ahead.
‘ Taking control of our destiny’
” Amazon is our largest customer, but it is not our most profitable customer”, Tomé said. ( It represented nearly 12 % of UPS ‘ 2024 revenues. )
The retailer has been a , UPS , customer for 30 years, and they hold Amazon in “high regard”, she said.
But when it came time to renegotiate the contract,  , UPS , decided it was time to “rightsize” the network. ” This was  , UPS , taking control of our destiny”, she said.
The anticipated drop in Amazon volume is five times faster than the drop in Amazon volume that UPS  has already experienced since 2021, and company leaders claim that this will free up resources to shift focus to other more profitable businesses.
Amazon, which has been building out its own logistics network,  , delivered , more packages than , UPS , in 2022.
The move is “probably a win-win” for both Amazon and , UPS, says , Satish Jindel, president of shipment technology firm ShipMatrix.
They both recognize that they are entering a competitive relationship, and they could as well approach it in a friendly, gradual way that would benefit them both.
He points to” Fulfillment by Amazon”, which is now delivering packages of other retailers on the Amazon platform, packages that were being delivered by , UPS, FedEx or the post office. ” That’s a competitive development”, he said.
CFO Dykes of UPS stated that the move with Amazon will result in a drop in “fixed costs,” including reducing labor, closing up to 10 % of UPS’ buildings, and reducing its vehicle and aircraft fleets.
” Our labor costs will flex with volume”, Tomé confirmed. ” As volume goes up, we have more hours. As volume comes down, we have less hours”.
In follow up questions, a , UPS , spokesperson told , The Atlanta Journal-Constitution , it was too early to release specifics on what that could mean for UPS ‘ workforce. More information was promised in the upcoming earnings release in April.
The company last year , announced , it would lay off 12, 000 management positions. It employs about 500, 000 globally.
” This is not a company that is shrinking. This is a company that is gliding down its largest customer”, Tomé said.
She said the company needed to address the news of Amazon as it makes a significant change to its business model.
What’s next
It’s one of many changes that” will put us further down the path to becoming a more profitable, agile and differentiated , UPS , that is growing in the best parts of the market”, Dykes said.
The company sees one of those “best parts” as its growing health care logistics segment, in which it doubled revenue between 2015 and 2023 to$ 10 billion.
Kate Gutmann,  , UPS , president of international, health care and supply chain, told investors last spring the company plans to double that number again by 2026.
Its , acquisition , of a European cold-chain logistics provider just this month was the latest in a flurry of recent investments to help ramp up its temperature-controlled capacity, which is key for health care shipping.
Another major recent change for , UPS , was an end to its relationship with the , U. S. Postal Service , for the final mile of its economy” SurePost” product.
Tomé said that happened after the , Postal Service , wanted to require customers like , UPS , to rely on postal service sorting facilities — and to charge more.
The , Postal Service , change, which went into effect , Jan. 1, has resulted in a nearly 10 % average rate increase for UPS SurePost deliveries, she said, but it has not increased driving miles thanks to route algorithm adjustments.
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