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Speaker 1: I want to welcome our Bloomberg TV and radio audiences.

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Speaker 1: One company that we're watching today is UPS. The company

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Speaker 1: expects sales and profit to grow over the next three years.

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Speaker 1: The company outlined its new strategy during an investor presentation

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Speaker 1: this morning, projecting revenue to grow by as much as

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Speaker 1: one hundred and fourteen billion dollars and adjusted operating margin

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Speaker 1: above thirteen percent by twenty twenty six. Joining us now

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Speaker 1: for more on this plan is Carol Tomey, CEO of UPS. Carol,

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Speaker 1: thank you so much for joining us. I know it's

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Speaker 1: been quite a busy day. I got to ask the

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Speaker 1: stock is down almost eight percent, investors not liking it.

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Speaker 2: Why, Well, Alex, if I could answer that question, I'd

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Speaker 2: probably have a different job. I was really proud of

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Speaker 2: our team today and the outline that we provided to

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Speaker 2: grow our company, our revenues and our margin and invest

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Speaker 2: in the future. So I'd love to talk about our

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Speaker 2: plans and how we're going to create value over the

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Speaker 2: long term.

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Speaker 1: So, first of all, that was a great answer. Second

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Speaker 1: of all, I think to the point what some analysts

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Speaker 1: were pointing out was a couplefold One is that you're

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Speaker 1: going to have to maybe raise prices in order to

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Speaker 1: meet some of these estimates in a tough growth environment.

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Speaker 1: So I wanted to get your thoughts on that. Yeah,

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Speaker 1: so give us your thoughts on that first.

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Speaker 3: I'm happy to.

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Speaker 2: So we divided our growth into three different segments, the US, International,

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Speaker 2: and then supply chain solutions, with an overarching theme of

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Speaker 2: growth in healthcare and healthcare logistics is probably the most

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Speaker 2: exciting growth opportunity we have ahead of us. The addressable market, well,

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Speaker 2: it's big one hundred and fifty two billion dollars, although

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Speaker 2: we're focusing on the complex side of healthcare logistics, which

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Speaker 2: is about.

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Speaker 3: Eighty two billion dollars.

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Speaker 2: Last year, our healthcare logistics revenue was ten billion dollars.

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Speaker 2: Over the next three years, we plan to double that

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Speaker 2: to twenty billion dollars. So that's one way we're going

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Speaker 2: to grow without raising prices. We're just going to lean

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Speaker 2: into an opportunity that values our end to end complex

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Speaker 2: logistics network. If we come back to the United States,

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Speaker 2: we plan to grow revenue by about ten billion dollars.

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Speaker 2: Part of that will come from volume growth and part

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Speaker 2: of that will come from higher revenue per piece. But

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Speaker 2: on the revenue per piece, don't be confused by the

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Speaker 2: growth there. Part of that is leaning into parts of

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Speaker 2: the market that really value our end to end network,

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Speaker 2: like small and medium sized businesses, and those packages tend

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Speaker 2: to have a higher revenue per piece than other packages.

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Speaker 2: We also are leaning into the B to B space,

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Speaker 2: and those packages tend to have a higher revenue per piece.

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Speaker 2: And then finally, well, we do tend to raise prices

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Speaker 2: every year. We have something called a general rate increase.

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Speaker 2: Our general rate increase for twenty twenty four is five

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Speaker 2: point nine percent. Now, I don't think we'll hold all

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Speaker 2: of that, but we should hold about fifty percent of that.

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Speaker 4: I am curious, though, Carol, when you talk about those

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Speaker 4: growth targets and those ambitions, where are those customers coming from.

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Speaker 4: Are they basically with one of your rivals now and

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Speaker 4: you think that maybe you can sort of poach some

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Speaker 4: of those people. Are these new folks that maybe aren't

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Speaker 4: really using a shipping in logistics service right now? That

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Speaker 4: will now somehow I'll find you at ups.

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Speaker 2: So the answer is yes to all above. So if

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Speaker 2: I think about healthcare logistics, it's highly fragmented, with tens

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Speaker 2: of thousands of players in that space. We have an

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Speaker 2: opportunity to grow into the space because we have an

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Speaker 2: end to end solution coupled with coal chain packaging ultra

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Speaker 2: coal chain packaging. So we're the best in the world

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Speaker 2: in that and we can aggregate this fragmented market into

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Speaker 2: an end to end solution. If we think about growth

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Speaker 2: outside of the United States, the addressable market that we're

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Speaker 2: going after is about fifty billion dollars and that's held

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Speaker 2: by other players, players that you can think of, like, oh,

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Speaker 2: the largest player in the world outside of the United States,

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Speaker 2: for example. So there will be a share shift opportunity

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Speaker 2: as we continue to sell across our end to end portfolio.

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Speaker 2: And this really differentiates us from many of the players

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Speaker 2: in our market because we believe it orchestration.

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Speaker 3: Yeah, because we have.

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Speaker 2: An end to end network, we can change the mode

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Speaker 2: that you need to ship your products the most efficiently.

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Speaker 4: So that's the sales growth story going forward. Talk to

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Speaker 4: me a little bit about the bottom line about margins.

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Speaker 4: You've already been in cost cutting mode. We've seen at

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Speaker 4: least announcements of some of those layoffs here. What more

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Speaker 4: is coming? What more should investors expect?

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Speaker 2: Yes, So last year, as you know, the small package

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Speaker 2: market shrunk from where it had been the previous year,

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Speaker 2: and so we looked at that reality and said, we've

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Speaker 2: got to right size our business to meet the size

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Speaker 2: of our company. So we did make some addition decisions

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Speaker 2: to do just that under an operating model of.

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Speaker 3: Fit to serve.

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Speaker 2: Moving past that, though, is the very exciting opportunity that

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Speaker 2: we have to drive out cost through automation. Do you

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Speaker 2: know that we have over one thousand buildings in the

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Speaker 2: United States and many of these buildings were built years ago,

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Speaker 2: sixty years ago. We're one hundred and seventeen years old

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Speaker 2: as a company, and as we looked at the buildings,

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Speaker 2: we said, my gosh, we have an opportunity actually to

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Speaker 2: consolidate buildings, consolidate buildings that aren't automated into brand new

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Speaker 2: automated buildings.

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Speaker 3: And drive productivity.

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Speaker 2: So we call this Network of the Future, which we

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Speaker 2: announced this morning, and it's very exciting. We will have

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Speaker 2: by the end of our initial phase, we will have

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Speaker 2: four hundred buildings that are fully automated. And with this automation, well,

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Speaker 2: we're going to drive out cost. We'll drive out three

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Speaker 2: billion dollars of cost between now and twenty twenty eight

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Speaker 2: and about half of that will be realized by twenty

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Speaker 2: twenty six, Carol.

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Speaker 1: So the automation doesn't necessarily just mean layouts.

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Speaker 2: Automation is automating inside of the buildings. It means everything

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Speaker 2: using automation for route optimization, we're using automation to change addresses,

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Speaker 2: using automation to change sort packages. Of course, using automation

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Speaker 2: to actually put packages into package cars and then deliver it.

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Speaker 2: So it's end to end automation and with end to

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Speaker 2: end automation, Yeah, there's a productivity opportunity which means we

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Speaker 2: don't need as many people to move the packages inside

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Speaker 2: of the buildings that we have today, but there's an

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Speaker 2: opportunity for those people to do something else. So as

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Speaker 2: we lean to automation and technology, particularly generative AI, there's

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Speaker 2: an opportunity to move off of the floor of the

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Speaker 2: building and go into the control rooms.

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Speaker 1: So then going back to the healthcare, well, I guess

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Speaker 1: in general you had mentioned that revenue targets will include

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Speaker 1: six billion dollars of inorganic growth. Where's the priority for that?

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Speaker 1: Where would you like to be spending most of that money?

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Speaker 2: So most of that six billion dollars is in what

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Speaker 2: we call a pipeline. We've been actively looking at opportunities

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Speaker 2: to expand our healthcare logistics portfolio. In fact, we've made

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Speaker 2: a couple of acquisitions recently, one Bomy, the second MNX

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Speaker 2: Global Logistics.

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Speaker 3: Both of these acquisitions enhanced.

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Speaker 2: Our capabilities, particularly in coal chain. So as we think

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Speaker 2: about opportunities going forward, we're going to look for those

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Speaker 2: enabling acquisitions.

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Speaker 3: They're all around the world. It's like a string of pearls.

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Speaker 2: There's no large acquisition, but a string of acquisitions that

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Speaker 2: will continue to enhance our capabilities and allow us to grow.

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Speaker 2: So the number wasn't made up. It's based on a

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Speaker 2: pipeline that we're actively working.

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Speaker 4: Carl, I do want to ask you a bit of

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Speaker 4: a broader question here, just about the health of our

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Speaker 4: supply chains here in the US. As you know, there

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Speaker 4: was a horrific and tragic accident overnight in Baltimore with

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Speaker 4: the loss of life. But of course now a lot

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Speaker 4: of people looking at the potential economic toll they need

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Speaker 4: to reroute ships, need to reroute ground transportation, rail transportation

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Speaker 4: in order to get things off the ship is ups

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Speaker 4: in any way affected by the collapse of that bridge.

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Speaker 2: Well, our hearts goes out to those who were affected.

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Speaker 3: It was just a horrific accident.

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Speaker 2: We have checked in on all of our UPS folks

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Speaker 2: in that area, and all of our folks are safe,

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Speaker 2: thank goodness. Because we do have an end to end

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Speaker 2: global supply chain, we can reroutect products to different ports

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Speaker 2: around the world. We can also move it off of

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Speaker 2: the air, the off of the ocean and put it

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Speaker 2: into the air will help re route the world. We

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Speaker 2: do this as a matter of course we can.

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Speaker 4: And so for the customers that you're existing, customers that

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Speaker 4: depend on you, depend on UPS, and more importantly the

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Speaker 4: folks at the end of that line who also depend

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Speaker 4: on getting delivery of those things from medicine and other

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Speaker 4: things that are critical here, what type of disruptions, if

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Speaker 4: at all, should they expect.

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Speaker 2: Well, I can't speak to this specific accident because I

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Speaker 2: don't know the cargo on the carrier, but when it

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Speaker 2: comes off, the carrier will help to get it routed

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Speaker 2: and for on because they'll need to be a repair. Obviously,

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Speaker 2: you can reroute ocean freight to ports like in Savannah

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Speaker 2: or up the northeast coast, so we'll we've got a

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Speaker 2: presence everywhere, so we can assist in that, Carol.

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Speaker 1: Before we let you go, of course, we're staying on

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Speaker 1: the macro theme. What's your take on the US economy?

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Speaker 1: How are you doing.

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Speaker 3: So?

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Speaker 2: From our perspective, the US economy is very resilient, and

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Speaker 2: the good news from a year ago is that inflation

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Speaker 2: rates have come down because inflation actually had an impact

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Speaker 2: to our business, a negative impact. Think about this, when

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Speaker 2: inflation rates were six percent or higher, particularly in the

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Speaker 2: area of food. More and more consumers' wallets, we're going

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Speaker 2: to food purchases, and those purchases, well, they don't shift

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Speaker 2: through our.

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Speaker 3: Small package network.

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Speaker 2: So as inflation has come down now to three percent

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Speaker 2: and the feed is indicated it's on its way to two,

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Speaker 2: that's better news for us because more dollars can go

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Speaker 2: into goods rather.

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Speaker 3: Than just food.

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Speaker 2: But it does appear to be a resilient economy. And

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Speaker 2: if I look outside the United States, candidly, we're seeing

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Speaker 2: some green shoots coming out of the China Asia trade lane,

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Speaker 2: particularly as it relates to what we the softness that

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Speaker 2: we saw a year ago.

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Speaker 4: Carol, we really appreciate you taking time to be with

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Speaker 4: us today. I know a very busy day for you.

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Speaker 4: As you really try to sell the ups story. Carol Tomai.

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Speaker 4: She is the CEO of United Parcel Service.