United Parcel Service plans to shutter 27 more parcel distribution centers this year. Most will close in the second quarter. Chief Financial Officer Brian Dykes laid it out plainly during the company’s first-quarter earnings call on April 28. This follows 23 closures already completed in the opening months of 2026, pushing the annual total toward 50 facilities gone.
The moves form the sharp edge of UPS’s sweeping network reconfiguration. Executives aim to slash $3 billion in structural costs by year-end, trimming 25 million labor hours and 30,000 positions along the way. Automation fills the gaps. Attrition and voluntary buyouts handle much of the workforce reduction. The Driver Choice program capped at 7,500 drivers after Teamsters pushback, but CEO Carol Tomé insists it hit the mark from the start. “The market has changed and we’re adapting to it,” Tomé said. “We’re overturning the old industry assumption that scale alone drives profitability. Instead, we’re focused on premium segments like SMB, B2B and complex healthcare.”
And it’s working, at least on revenue quality. Small-and-medium business volume hit 34.5% of total U.S. parcels in the first quarter—a record high. Revenue per piece climbed 6.5%, fueled by base rates, better customer mix, and fuel surcharges. Healthcare logistics crossed $3 billion quarterly for the first time, with all segments growing year over year. Pharma firms now ship GLP-1 weight loss drugs straight to consumers, bypassing distributors. UPS eyes that trend hungrily.
But first-quarter results exposed the pain of transition. Consolidated revenue dipped 1.4% to $21.2 billion, as domestic volumes plunged 8%. Air packages fell 8.9%; ground 7.9%. Adjusted operating profit slid to $1.3 billion, margins to 6.2%. Earnings per share dropped 28% to $1.07—still beating Wall Street forecasts. Cost per piece surged 9.5%, hit by $350 million in extras: leased aircraft after grounding 27 MD-11s post-crash, Ground Saver handoffs to USPS, bad weather, higher insurance. UPS tendered 977,000 packages daily to the Postal Service in Q1, ramping to 1 million in Q2.
Amazon’s the big culprit behind the volume drop. UPS cut another 500,000 pieces per day in the quarter. By mid-year, that hits 2 million daily, stripping $5 billion in revenue. Amazon now accounts for just 8.8% of volumes, down from over 13%. Last year’s contract rewrite ended the e-commerce giant’s dominance. Low-margin B2C shipments? Out. Premium B2B, healthcare, automotive, electronics, returns? In.
Facilities feel the squeeze. Court filings earlier this year named 22 union-staffed sort centers across 18 states for first-half shutdowns, including spots in Atlanta’s hub area, Dallas’s Chalk Hill, Las Vegas North, Baltimore’s Quad Avenue, and Miami Downtown Air. FreightWaves detailed the list in February. The Defiance, Ohio terminal at 820 Carpenter Road closes June 19, part of this broad consolidation aiming for fewer, bigger automated hubs over five years—up to 200 total. “We’re well into the largest U.S. network reconfiguration in UPS history,” spokesperson Karen Tomaszewski-Hill told The Village Reporter.
International offers bright spots amid domestic gloom. Package revenue rose 3.8% to $4.5 billion, revenue per piece up 10.7% despite 6% volume decline. U.S. imports from Europe dropped 22.5%, from China 18.3%—tariffs and de minimis rules bite. Still, expansions like Incheon Airport hub and Taiwan’s largest logistics center speed premium flows.
Supply chain solutions turned profitable, margins jumping to 8.1% on $2.5 billion revenue. Digital tools like Roadie and Happy Returns drove 19.9% growth. UPS rolled RFID sensors into every U.S. delivery vehicle, facility, and 5,500+ The UPS Stores—even Amazon returns via Staples, Ulta Beauty partners. Tech keeps premium customers loyal.
Guidance holds firm. Full-year revenue ~$89.7 billion, flat. Adjusted operating margin 9.6%. Q2 revenue grows low single digits, margins 7.5%-8.5%. Second half accelerates as Amazon cuts finish, aircraft leases fade, new Boeing 767s arrive. “Cost pressures are largely behind us,” Dykes assured analysts, per the Q1 earnings deck. Tomé calls 2026 the inflection year.
Challenges linger. Barclays’ Brandon Oglenski flags potential volume bleed to FedEx. Middle East tensions spike fuel for rivals. Union friction over buyouts simmers. Yet UPS bets its slimmer network handles peak demand better, frees capital for automation. Premium mix should lift margins past 12% long-term.
Investors watch closely. Shares dipped post-earnings, but beat expectations. The overhaul—Yahoo Finance and FreightWaves broke the closure tally—marks UPS shedding e-commerce baggage for healthcare heft. Execution decides if pain yields enduring gains.
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