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UPS (UPS) stock plunges after the company reported earnings and provided a weak 2025 forecast as it cuts deliveries from its largest customer, believed to be Amazon (AMZN).
UPS CFO Brian Dykes joins Catalysts with Seana Smith and Josh Schafer to discuss the shift and what it means for the company and its collaboration with Amazon.
"One of the things that we announced was a strategic decision for us to start to glide down some of the volume from our largest customer over the course of the next six quarters," Dykes says, outlining that he views this move, along with other efficiency programs, as the company "taking control of our own destiny."
The CFO says the decision enables the company to manage its assets and resources in order to "drive higher yields and returns."
"The result of this is that we will be taking volume down, and we'll have revenue down in 2025 and 2026, but it improves the margin in every quarter," he explains.
He continues, "We've had a 30-year relationship with Amazon ... with the amount of volume that we're talking about moving, it has to be an orderly transition, or else it would impact both their customers as well as our residual customers, and they will continue to be a customer of ours for the long term."
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"The portion of the business that we're transitioning out of just doesn't make sense for us to do ... from a competition standpoint, we actually still help Amazon with a lot of the things that make sense with our network, which is built for long zones, multiple pickup locations, and moving things across the country versus theirs, which is built for a much shorter fulfillment center to door network capability."
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This post was written by Naomi Buchanan.