UPS Reports Q4 and FY 2022 Results: Lower Than Expected Q4 2022 Volume, Improving Margins; Predicts Bumpy 2023

Supply Chain
Written By Rick Watson

UPS Reports Q4 2022 Results: Lower Q4 2022 Volumes, Improving Margins; Bumpy 2023

* Q4 Volume declined more than expected.

September / October hit expectations.

Surge in Cyber Week beat expectations.

Post Cyber-week missed expectations by a wide margin.

B2C avg daily volume declined 3%, B2B declined 5% due to mfg/distribution declines

Consumers returned to pre-pandemic shopping behaviors. Holiday retail sales lower than expected.

2022 4Q

* Revenue down 2.7% y/y, operating profit declined 3.4%.

* Revenue quality initiatives offset volume decline, operating margin down 10bps

* 3.8% average daily volume decline y/y, half due to Amazon (more later)

2022 4Q US

* SMB now 26.5% US daily volume, up 70 bps

* Revenue per parcel increased 7.2%

* US domestic operating profit

2022 Q4 intl

* Asia export declined 10%

* Intl Revenue down 8.3%

* Revenue per parcel flat

2022 Full Year

* Revenue increased 3.1% to $103B, increasing $3.1B over 2021 but missed target by 2% mostly due to stronger dollar

* Operating Profit 5.4% higher than last year to $13.9B

* US operating margin expanded to 12.8%, best in 10 years.

* ROIC increased 50bps

Amazon

* Amazon volume expected to decline another 40 bps in 2023, declined faster than expected in 2022.

2023 Outlook

* Bumpy. Rising interest rates, inflation, at least mild recession.

* Anchored to 2023 S&P Global economic forecast

* two scenarios (1) base case, and (2) conservative

** (1) base case: mild recession in first half, moderate recovery in second half. Average daily volume down on negotiated amazon declines, offset by SMB growth.

** (2) conservative: mid-single digit declines in average daily volume, weaker demand in asia first half, slower recovery in europe second half.

2023 Plans

* Digital Access Program (DAP) expanding internationally

* Adding 2.3M in Healthcare logistics warehouse space (½ US, ½ EU). Very high margin business.

Other 2022 notables

* Acquired Bomi group, Delivery Solutions. Invested in CommerceHub.

Rick Watson

Rick Watson founded RMW Commerce Consulting after spending 20+ years as a technology entrepreneur and operator exclusively in the eCommerce industry with companies like ChannelAdvisor, BarnesandNoble.com, Merchantry, and Pitney Bowes.

Watson’s work today is centered on supporting investors and management teams incubating and growing direct-to-consumer businesses. Most recently, in partnership with WHP Global, Rick was a critical resource in architecting the WHP+ platform, a new turnkey direct to consumer digital e-commerce platform that powers AnneKlein.com and JosephAbboud.com.

Watson also hosts a weekly podcast, Watson Weekly, where he shares an unbiased, unfiltered expert take on the retail sector’s biggest players.

In the past year alone, Rick has spoken at many in-person and virtual events as well as podcasts on topics ranging from retail/ecom to supply chain/logistics and even digital grocery including CommerceNext IRL, ASCM Connect, and Retail Innovation Conference.

https://www.rmwcommerce.com/
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