UPS (UPS) stock fell on Tuesday morning as the shipping company said softening consumer demand hurt its quarterly sales and 2023 outlook.
“In the first quarter, deceleration in U.S. retail sales resulted in lower volume than we anticipated, and we faced ongoing demand weakness in Asia,” Carol Tomé, UPS chief executive officer said in the company’s earnings release.
UPS isn’t projecting that things will get better, either. It sees full-year revenue of roughly $97 billion with an operating margin of roughly 12.8%, citing “challenging macro conditions and changes in consumer behavior.” Those numbers are at the low end of 2023 guidance ranges provided by UPS at the end of January.
UPS shares fell 6.8% at the market open, marking their largest drop to open a trading session since July 2021. The stock was down nearly 9% in early trading.
The delivery service reported first quarter revenue of $22.9 billion, down 6% from the same period last year. UPS’ $2.20 adjusted earnings per share was down 27.9% from the same period last year.
As management pointed out, the UPS sales decline follows the broader trend of retail sales in the U.S., which dropped on a monthly basis in both February and March. The most recent print saw retail sales decline 1% in March. Economists had only expected a 0.5% decline, according to Bloomberg consensus data.
In March, FedEx (FDX) reported quarterly earnings that ended on February 28 (a month earlier than UPS). FedEx also saw earnings per share drop double digits from the same period a year prior and revenues decline by low-double digit percentages across all segments.
E-commerce giant Amazon (AMZN) will provide more visibility on the health of consumer spending when the company reports first-quarter results Thursday. Wall Street expects Amazon’s online store revenue to decrease 1% from the prior.
Investors have been closely watching for signs that the US economy could spiral into a recession as the Federal Reserve raises interest rates to combat inflation. Softening consumer spending is driving concerns that a recession is ahead.
Thursday’s preliminary reading of first-quarter gross domestic product report is expected to give Wall Street another look at the health of the economy. Economists anticipate 2% growth, though Oxford Economics notes much of that growth came in the January.
“Early signs are that tighter bank lending standards are beginning to bite, but the full hit to activity won’t be evident until later this year,” Oxford Economics lead US economist Michael Pearce wrote in a note last week.
UPS results showed that the company’s US domestic segment held up the strongest, with volume dropping 5.4%. In a sign that stubborn inflation continues to hit package prices, a 4.8% increase in revenue per piece helped offset the decline in packages shipped.
Internationally, revenue and daily volume fell more than 6%, which UPS attributed to softness in China. Supply chain solutions saw the biggest drop for UPS in the first quarter, with revenue declining 22.5%.
Josh is a reporter for Yahoo Finance.