“Although our building footprint is changing, our pickup and delivery footprints are not. We remain committed to providing industry reliability to all customers nationwide. We will achieve it with fewer buildings,” said CEO Carol Tome. “For our larger customers, we are working with them to update their operations plans and in areas where we close buildings (small and medium businesses), UPS is still accessible and convenient through their retail stores, drop boxes and access points.

Nando Cesarone, president of U.S. operations, said that by the end of the network restructuring, 400 facilities will be partially or fully automated. "The end result will be a more efficient operation with less dependence on the labor force," he said.

Tome says that in addition to the Automated Sorting Center, UPS has also looked at the use of automatic tag applications, unloading and loading trailers, and other types of features.

She added that the efficiency program combined with abandoning the unprofitable Amazon business has enabled management confidence to reach its 12% target of operating margins in the U.S.

UPS also launched an efficiency driver designed to redesign internal processes earlier this year, with an estimated $1 billion savings next year.

Some analysts believe that UPS should generate more savings from the restructuring. Investors are expected to save $5 billion in savings over the next 18 months, while previously announced costs have been successful, Morgan Stanley analyst Ravi Shankar said in a client note.

Management is essentially replacing the previous 2028 annual spending reduction target (with $3 billion from the future network and $1 billion from the process efficiency program), its three-year plan “unpublished scale is not disclosed, but $3.5 billion in 2025 launched $3.5 billion in 2025 – it’s hard to save on the continual listing.

UPS led to a slight defeat of analyst expectations in the first quarter, which has been lowered in recent weeks due to global market turmoil caused by the U.S. government's aggressive global tariff policy.

Revenue fell 0.7% year-on-year to $21.5 billion, while adjusted operating profit increased by 1% to $1.7 billion.

UPS did not provide updated full-year guidance due to the uncertain macroeconomic environment triggered by the U.S. government’s aggressive global tariff policy. But the forecast for the second quarter was negative for a year.

Income is expected to be $21 billion, down from $21.8 billion, with an average daily domestic volume drop of about 9%. International revenue will fall by about 2% due to demand-related surcharges and tariff uncertainties.

UPS direct contact tariffs are limited. The U.S. imports are about 400,000 pieces per day, less than 2% of the global total average daily volume. China to the United States is the most profitable trade for UPS, accounting for 11% of total international revenue. Revenue from other countries to the United States accounts for about 17% of total international revenue.

In the first quarter, international revenue increased by 2.7%, due to an average daily volume increase of 7.1%. UPS said there is a surge in demand for our inbound services as customers make inventory purchases ahead of expected tariff changes.

UPS expects a weaker U.S. demand for U.S. imports, which face 145% tariffs, will be offset by growth in China to non-U.S. trade lanes and growth from the rest of the world to the U.S.

Tome said the company's top 100 customers are exploring various strategies to deal with tariffs, including absorbing fees, passing them to consumers and asking suppliers to eat some increase. The company also surveyed nearly 45,000 freight customers, most of whom said they are using existing inventory levels to support sales. Many large importers store goods 30 to 90 days ahead of schedule to avoid tariffs imposed earlier this month. Deferred orders lead to reduced transportation activity. Importers also said they would transfer more cargo from airfire to sea when possible.

"We do see certain numbers slowing down in businesses and small and medium-sized businesses, especially in SMBs, because they don't have the tools to handle the changes our corporate customers make. This will put some pressure on revenue per package and profit," Dykes said.

Tome added that smaller companies have no working capital to book inventory and have less ability to switch to non-Chinese countries than large retailers with contract manufacturers.

Online shoppers on Chinese platforms will experience huge price increases when ending tariff exemptions for low-priced goods in the United States on May 2, triggering 145% of duties and other handling costs. Temu and Fast-Fashion Merchant Shein show consumers how much imports are during checkout, and Amazon reportedly does the same.

UPS has long promoted its ability to make it easier for small businesses to engage in global trade by accessing its closed-loop global network, expertise and technology. It recently launched a new tool for retailers called Global Checkout. It uses AI to evaluate items in the shopping cart and calculates the correct import tax, shipping and handling fees and taxes when purchasing

The average daily volume was lower than expected due to some customers’ response to tariff uncertainty created by the Trump administration.

During the quarter, UPS completed a lecture on its Surepost final delivery product from the U.S. Postal Service and changed the name of its most economical shipping service to a ground saver. Re-control of the product, which is mainly used by large retailers to deliver goods to the residence, makes UPS more operational flexibility and reliability, while the cost has barely increased after the postal service began to increase shipping prices. Tome said that on-time delivery for ground savers in the first quarter was 97%.

The parcel giant has also reintroduced ground delivery with freight pricing greater than 150 pounds, offering similar package pricing for low freight. UPS sold its UPS freight business to TFI International four years ago.

Domestic revenues rose 1.4%, driven by an increase in air cargo and a 4.5% increase in revenue per block, which partially offset the decline in volume. Operating profits in the domestic segment increased by $164 million.

Average daily ground volume fell 2.5% year-on-year, and total air volume fell 9.6%, partly due to the gliding of Amazon's business. UPS said that in addition to Amazon’s decline in numbers, the average daily volume of total air driven by demand from healthcare and high-tech customers grew by 6.2%.

Revenue from supply chain solutions fell 14.8%, mainly due to the sale of truck brokers Coyote Logistics. Due to the low volume, air transport revenue is slightly lower year by year, which is offset by the higher prices in the ocean market.

Last week, UPS announced an agreement to acquire Canadian Logistics Corporation and Raul Medical Group for $1.6 billion. As part of the strategic effort, focus on a part of the higher profitable business as parcel quantity declines.

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