UPS to Slash Package Deliveries for Amazon

A delivery vehicle passes by a UPS depot in New York City, on June 29, 2023. John Minchillo/AP Photo

Shares of UPS crashed to their lowest price since 2020 after the shipping giant announced it will slash its business with Amazon.

On Jan. 30, the Atlanta-based United Parcel Service, Inc. issued its fourth-quarter earnings release summarizing the company’s performance in 2024. During a conference call accompanying the earnings release, UPS CEO Carol Tomé said the company wasn’t expecting its demand to rise in 2025 and would be reducing its business with Amazon.com Inc.

As of about 12 p.m. EST, UPS shares had fallen to $112.03 a share from an opening price of $117.39 a share. UPS stock closed at $133.78 a share on Jan. 29.

According to historical price data, UPS shares have had the lowest trading price since late June 2020.

During the conference call, Tomé said UPS had concerns about the volume and revenue concentration tied up with delivering Amazon packages. Looking ahead, she said, the company realized if it took no action, it would “drive diminishing returns.”

Now, Tomé said, Amazon and UPS reached an agreement in principle to lower the volume of packages UPS delivers for the Seattle-based internet retail and technology company “by more than 50 percent by the second half of 2026.”

During the call’s question-and-answer session, Tomé said Amazon is the company’s largest customer, “but it’s not our most profitable customer.”

She said Amazon packages made up about 11.8 percent of the company’s overall revenue in 2024. Brian Dykes, UPS executive vice president and chief financial officer, said on the same call that Amazon will likely make up about 20 percent of UPS’s package volume in 2025.

“Its margin is very dilutive to the U.S. domestic business,” Tomé said. “Our contract with Amazon came up this year, and so we said it’s time to step back for a moment and reassess our relationship because if we take no action, it will likely result in diminishing returns.”

UPS executives said the Amazon move is part of a broader strategy change. Tomé called the small-package business a “slow growth market.”

Along with the changes to the Amazon delivery, Tomé said UPS is no longer using the United States Postal Service for its SurePost product. In the future, it will reconfigure its network and review its overall efficiency in a drive to save more than $1 billion.

In his segment of the conference call, Dykes said UPS is already dialing back the volume it is delivering for Amazon and will continue to reduce its package volume for the retailer in 2025 and 2026.

“We are deliberately shifting our business and increasing our focus on growing higher yielding volume and value share. Lower overall volume levels from this customer will lead to lower revenue dollars in the near term.”

Shares of Amazon.com Inc. fell as low as $232.22 a share on Thursday from an opening price of $237.31 a share. However, by midday on Jan. 30, the stock had recovered to about $234.45 a share.

Representatives of Amazon and UPS did not immediately respond to a request for comment from The Epoch Times.

According to its latest filing with the Securities and Exchange Commission released on Thursday, UPS said it had earned a net income—or profit—of about $5.78 billion on an overall revenue of about $91.1 billion. That was a decline from the about $6.71 billion in profit the company reported on about $90.9 billion in 2023.