UPS Trims Amazon Deliveries for Long-Term Profitability
UPS's announcement of reduced deliveries for Amazon (AMZN) triggered a 15% stock decline on Thursday. However, the company remains steadfast in its decision, citing increased profitability as the primary goal.
CFO Brian Dykes emphasized that the strategy aligns with UPS's broader objective of "managing assets and resources in areas where we can drive higher yields and returns." The move will result in a 50% reduction in Amazon delivery volume by 2026 and is expected to bolster profit margins.
Dykes noted that the eliminated business was no longer feasible for UPS, and Amazon will continue to be a partner, albeit with a reduced role in multi-location pickups and cross-country shipments.
Despite exceeding earnings expectations in Q4, UPS projects 2025 revenue below analysts' forecasts, sparking concerns among investors. Evercore ISI's Jonathan Chappell expressed surprise at the swift reduction in Amazon deliveries and its potential impact on near-term results.
Jefferies analyst Stephanie Moore highlights the focus on weak sales outlook and reduced Amazon volume. She characterizes the move as a disappointment for investors who have faced previous setbacks.
UPS remains committed to its long-term profitability strategy, despite the near-term impact of reduced Amazon deliveries. The company anticipates realigning its network to mitigate the volume loss and drive tangible results in the future.