(Reuters) -United Parcel Service Inc on Tuesday pegged full-year revenue at the lower-end of its prior forecast and warned of persistent pressure on parcel volumes, deepening the gloom for the shipping industry pummeled by high inflation.
Most delivery firms have been left with a bloated delivery capacity after online sales that had peaked during the pandemic started to fizzle as high inflation dented discretionary spending.
“Deceleration in U.S. retail sales resulted in lower volume than we anticipated, and we faced ongoing demand weakness in Asia… Given current macro conditions, we expect volumes to remain under pressure,” UPS Chief Executive Carol Tomé said.
The commentary from the world’s largest parcel delivery firm dampened hopes of a respite for the shipping industry in the second half of the year.
UPS’ shares fell 5.1% at $185.75 in premarket trade after it forecast full-year revenue to be about $97 billion, at the lower end of its prior forecast of $97 billion to $99.4 billion. Analyst were expecting $98.14 billion, as per Refinitiv data.
It also expects 2023 adjusted operating margin to be at about 12.8%, compared with its prior forecast of 12.8% and 13.6%.
The U.S. shipping industry is also bracing for the July 31 expiration of the contract covering UPS’s Teamsters-represented workers. FedEx and other rivals are using the prospect of a potential strike to woo business away from UPS.
UPS in recent quarters has, however, benefited from a strong focus on moving high-margin parcels, coupled with measures to control costs.
The company reported an adjusted profit of $2.20 per share compared with average analysts estimate of $2.21 per share, as per Refinitiv data. Revenue rose 6% to $22.93 billion, short of the average analyst estimate of $23 billion.
(Reporting by Priyamvada C in Bengaluru; Editing by Shinjini Ganguli)