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UPS Cutting Costs and Amazon Cutting Jobs · Bloomberg Intelligence

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  Speaker 2: One of the stock stories in the news, folks, is
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  Speaker 2: it is Amazon cutting fourteen thousand jobs. I was doing
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  Speaker 2: from reading a Bloomberg news and they had like almost
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  Speaker 2: doubled their.
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  Speaker 3: Headcount pre pandemic.
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  Speaker 2: So we're coming out of the pandemic, and so it
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  Speaker 2: makes sense that they can should be shedding some jobs.
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  Speaker 3: Perhaps let's check it.
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  Speaker 2: With put them Boil, senior US e commerce and retail
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  Speaker 2: analysts for Bloomberg Intelligence. Put them talk to us about
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  Speaker 2: Amazon here at fourteen thousand jobs, It seems like a
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  Speaker 2: big number, but I do know and for those effect
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  Speaker 2: that it is a big number. But they have, you know,
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  Speaker 2: over a million employees. So what's happening at Amazon?
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  Speaker 4: Yeah, it sounds like a big number in the grand
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  Speaker 4: scheme of things, than for Amazon, it's not needle moving right.
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  Speaker 4: It's fourteen thousand is about four percent of its corporate workforce,
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  Speaker 4: and even smaller when you look at it on a
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  Speaker 4: base of one point five to five million employees worldwide,
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  Speaker 4: so still very small. But they're cutting, right, and that's
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  Speaker 4: the thing They've been cutting since after the pandemic, as
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  Speaker 4: you mentioned, and we think this is just the beginning.
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  Speaker 4: We're just scratching the surface. There will be more cuts
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  Speaker 4: with Amazon, especially as automation and AI continue to fuel
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  Speaker 4: efficiencies across the organization. We haven't even got to warehouses
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  Speaker 4: yet right where there's a lot of automation going on.
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  Speaker 5: So is AI the main reason behind the lanes I mean,
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  Speaker 5: is the company's run to offset that rising AI capex.
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  Speaker 4: I mean it helps right because they're continuing to invest
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  Speaker 4: in AI and capex through AWS. But how do they
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  Speaker 4: drive margin efficiencies. It's through using some of those efficiencies
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  Speaker 4: and pairing back on the employee headcount. That and automation,
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  Speaker 4: those are the I think two biggest things that are
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  Speaker 4: going to drive the need for more efficient and then
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  Speaker 4: give back to the company through fewer headcounts.
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  Speaker 2: I don't know, Lisa, call me Seneco, but I believe
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  Speaker 2: this is my opinion that AI is can be a
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  Speaker 2: net job taker.
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  Speaker 3: And I think in size too, for a lot of industries.
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  Speaker 3: I think this is going to be a really We're
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  Speaker 3: continuing to see it in die stories.
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  Speaker 2: I think so when you know, some CEOs are trying
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  Speaker 2: to paint a different picture. So all right, let's take
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  Speaker 2: a look. You're you're the boss of all things retail?
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  Speaker 2: How's this holiday season going to be?
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  Speaker 3: Here? Is this is gonna be a good year?
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  Speaker 4: I think so. I think the consumer has been holding
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  Speaker 4: up relatively well. Spending is higher, and we think Amazon's
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  Speaker 4: continuing to take share. They're going to be reporting this Thursday,
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  Speaker 4: and we're expecting solid retail sales numbers high single digits,
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  Speaker 4: and we do think that they're going to take share
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  Speaker 4: once again this holiday season. Overall, I think the consumer
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  Speaker 4: will show up.
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  Speaker 5: Can you dig into go back to Amazon Andy Jase's
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  Speaker 5: kind of role in the company. It seems to be
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  Speaker 5: filled with job cuts, changing different. What's his focus right now?
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  Speaker 4: I mean, he clearly said that he's going to be
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  Speaker 4: cutting back on jobs earlier this year in the summer,
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  Speaker 4: so we do see that rolling out. I think the
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  Speaker 4: focus is to invest in long term growth. I mean,
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  Speaker 4: he was very clear in his statements that you know,
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  Speaker 4: we can't worry about the intra quarter the quarter to
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  Speaker 4: quarter trends, and we really need to stay focused on
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  Speaker 4: the longer run. How does Amazon continue to to remain
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  Speaker 4: the leader that it has been, because, as you know,
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  Speaker 4: it's very easy to now operate an online business, whether
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  Speaker 4: it's through Shopify, everyone almost has the same playing ground
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  Speaker 4: to compete in. So how does Amazon differentiate? And the
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  Speaker 4: only way to do it is continue to invest in
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  Speaker 4: the future, and right now that's Ai, whether it's jen Ai,
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  Speaker 4: agentic Ai, wherever it may lead us, it is AI.
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  Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this.
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  Speaker 2: Through ups is. In the news today, I've poorted some numbers,
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  Speaker 2: cutting some headcount. The street likes it. The stocks up
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  Speaker 2: seven and a half percent. It's down twenty four percent
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  Speaker 2: year to date, but a good day for United Parcel Service.
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  Speaker 3: Let's break it down with Lee Clasgow.
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  Speaker 2: He's our senior logistics analyst for Bloomberg Intelligence. He covers
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  Speaker 2: the rails the trucks, the shipping, the air fready covers
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  Speaker 2: it all.
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  Speaker 3: We didn't really talk.
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  Speaker 2: To LEAD too much until the pandemic and then the logistics.
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  Speaker 2: We all became experts on logistics and we're like, Lee,
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  Speaker 2: help us out.
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  Speaker 3: We don't know what's going on. So Lee, thanks for
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  Speaker 3: joining us here talk to us about UPS. What's going
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  Speaker 3: on there?
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  Speaker 6: Yeah? Trust me, I enjoyableieve being a flavor of the month.
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  Speaker 6: So I'm glad to be here and talk about transports.
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  Speaker 6: You know, what's going on the UPS is they are
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  Speaker 6: making progress and they're executing on their plan. And their
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  Speaker 6: plan really is to create in a network that can
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  Speaker 6: not only handle, but thrive in an ever changing environment.
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  Speaker 6: And that change is being driven by e commerce. It's
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  Speaker 6: being driven by the uncertainty around tariffs. And what they've
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  Speaker 6: been able to do is increase productivity through technology, whether
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  Speaker 6: it's automation or AI. And that also they were stepping
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  Speaker 6: away from business from Amazon. You know, they noted an
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  Speaker 6: on the morning call that there are three quarters into
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  Speaker 6: a six quarter glide down of Amazon business and the
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  Speaker 6: reason why they want to move away from Amazon business
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  Speaker 6: that tends to be lower margin, lower yielding packages. But
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  Speaker 6: that's not to say that they don't want to totally
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  Speaker 6: walk away from Amazon, because their return business is a
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  Speaker 6: good business for them, and we're seeing you know, the
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  Speaker 6: success in the numbers, and you know, going into the quarter,
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  Speaker 6: I think investors were cautious or had low expectations, and
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  Speaker 6: management kind of exceeded those with the results. And their
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  Speaker 6: outlook really shows us that, you know, expectations for the
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  Speaker 6: fourth quarter in twenty twenty six, at least as it
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  Speaker 6: relates to you know, sell side analyst consensus is probably
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  Speaker 6: a bit low and it needs to move higher.
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  Speaker 5: Welle, can you get more into the cuts that we
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  Speaker 5: were talking about, thirty four thousand job cuts, Where were
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  Speaker 5: they seen and what kind of let's say, year over
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  Speaker 5: year cost savings does it expect in twenty twenty five
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  Speaker 5: from all of this.
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  Speaker 6: Yeah, so, you know, what they're trying to do their
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  Speaker 6: overall cost savings, which includes you know, the headcount reductions.
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  Speaker 6: You know, they're looking to get three point five billion
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  Speaker 6: dollars in cost savings this year. They've done around two
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  Speaker 6: point two billion of that so far, and some of
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  Speaker 6: the reductions are driven by you know, they offered early
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  Speaker 6: retirement for some of their drivers. They said they've had
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  Speaker 6: pretty good pick up with that, and that payoff should
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  Speaker 6: be about a year from what it costs costs something
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  Speaker 6: one hundred and seventy five hundred and eighty million dollars,
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  Speaker 6: and they mentioned on the call that it will take
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  Speaker 6: about a year to get to make those costs back up,
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  Speaker 6: so you know, it really should be paying for itself.
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  Speaker 6: And they're closing a lot of facilities. So they've they've
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  Speaker 6: closed you know, something like ninety ninety five facilities so far,
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  Speaker 6: and that's being driven by they don't need the network
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  Speaker 6: they had when they were, you know, really handling a
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  Speaker 6: lot of Amazon business and now that you know, like
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  Speaker 6: I mentioned earlier, they're walking away from that business. They're
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  Speaker 6: kind of reconfiguring their network. And they're also you know,
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  Speaker 6: as I mentioned, they're increasing overall automation. You know, they know,
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  Speaker 6: they're on their call that they've added automations around thirty
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  Speaker 6: five more facilities and about sixty six percent of their
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  Speaker 6: packages of touch these automated facilities, which is around three
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  Speaker 6: hundred basis points more than was last year, and that
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  Speaker 6: that numbers is going to continue as management makes more
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  Speaker 6: inroads at modernizing their facilities.
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  Speaker 3: Lee, what is the ups and maybe effed extra that matter.
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  Speaker 2: How are they kind of talking to you guys about
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  Speaker 2: tariffs and how it might be impacting their business just
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  Speaker 2: as a big, big part of supply chain.
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  Speaker 6: Yeah, you know, it's interesting. So for like a UPS,
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  Speaker 6: you know, there's good and bad when it comes to
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  Speaker 6: the tariffs and the more protectionist policies in the US.
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  Speaker 6: You know, we've ended the dominamus exemptions, which you know
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  Speaker 6: stated that if a shipment came into the United States
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  Speaker 6: and it was worth eight hundred dollars or less, it
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  Speaker 6: didn't have to pay a duty or a tariff. You know,
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  Speaker 6: the Biden administration was working towards getting rid of that.
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  Speaker 6: That Trump brought that Trump administration brought that to the
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  Speaker 6: finish line. You know, first it was it was just
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  Speaker 6: packages that were coming in from China and Hong Kong.
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  Speaker 6: And now that's been you know, all packages coming to
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  Speaker 6: the United States and that's hurting volumes. They noted their
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  Speaker 6: US or their China to US volumes were down around
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  Speaker 6: twenty percent and that's having a negative impact. Now you
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  Speaker 6: look at their forwarding business, you know, because of all
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  Speaker 6: these packages are now if they are going to be
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  Speaker 6: coming in a lower value packages have to pay duty,
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  Speaker 6: they need to lean more heavily on their customs business.
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  Speaker 6: So you've seen their supply chain business outperform this quarter,
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  Speaker 6: and I suspect a lot of that had to do
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  Speaker 6: with the additional fees that they generate from helping shippers
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  Speaker 6: clear packages through customs.
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  Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this.
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  Speaker 2: us back to your offices. We appreciate it, sir, you.
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  Speaker 7: Know, thank you Paul Lisa for coming. It's this is
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  Speaker 7: an annual tradition and we really appreciate it absolutely.
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  Speaker 2: I think when I was here last year at this time,
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  Speaker 2: you said twenty twenty four was going to be a
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  Speaker 2: record year in municipal bond issuance.
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  Speaker 3: That was what happened. How about this year, this year.
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  Speaker 7: Is going to be, in all probability another record.
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  Speaker 3: Wow.
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  Speaker 7: The growth of the business has been really robust. A
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  Speaker 7: number of factors that make that happen. First, the state
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  Speaker 7: and local government's the responsibility is being pushed down on
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  Speaker 7: them to issue more infrastructure debt. So if you think
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  Speaker 7: about infrastructure, eighty percent of what you think about is
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  Speaker 7: just infrastructure is financed at the state and local government level,
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  Speaker 7: not at the level. So this has been a year
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  Speaker 7: where many many issuers have come to market and we
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  Speaker 7: and that's a result of a lack of you know,
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  Speaker 7: a change in the federal support from healthcare to other programs,
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  Speaker 7: and so we think the stand local government is going
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  Speaker 7: to pick up where the federal government is stepping back.
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  Speaker 7: And so I think it's going to be a record
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  Speaker 7: year this year and probably pretty robust next year.
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  Speaker 5: Now, are there certain areas of many that have performed
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  Speaker 5: better than others?
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  Speaker 7: So well, I think from an activity standpoint, it's been
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  Speaker 7: across the board. Okay, so you see a lot of
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  Speaker 7: healthcare general obligations which are full faith from stan local
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  Speaker 7: governments themselves, lots and lots of projects across the country.
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  Speaker 7: I think that one of the areas that's going to
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  Speaker 7: be most dynamic going forward is power. You know, if
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  Speaker 7: you think about AI, the amount of power and data
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  Speaker 7: centers that are in their demands. I was speaking to
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  Speaker 7: one of the heads of one of the largest municipal
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  Speaker 7: power agencies and he said that the demand that they're
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  Speaker 7: being asked for now, let's assume that some of its
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  Speaker 7: double counting is going to be four to ten times
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  Speaker 7: with the produce right now, So.
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  Speaker 2: Sean, just for the folks that don't know what you
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  Speaker 2: guys do, BAM insures municipal bonds, giving another level of
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  Speaker 2: certainty for investors.
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  Speaker 7: That's correct. So we are a double A rated insurance
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  Speaker 7: company by Standard and Poors. And really what we do
• 12:26
  Speaker 7: is guarantee different than other kinds of insurance. We guarantee
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  Speaker 7: timely payment of principle and interest when due. So that
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  Speaker 7: means if there is a credit event that would cause
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  Speaker 7: a default, we pay first and then mitigate later. But
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  Speaker 7: one of the unique things that we do and the
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  Speaker 7: reason why at this point we've through our inception, which
• 12:48
  Speaker 7: is thirteen years, we've guaranteed one hundred and seventy billion
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  Speaker 7: dollars worth of transactions and we have had no defaults
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  Speaker 7: on these transactions. That's really because we focus on municipal
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  Speaker 7: essential infrastructure, state local government obligations, and we work with municipalities.
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  Speaker 7: If there are bumps in the road like what happened
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  Speaker 7: during COVID, we're proactive and working with the municipalities to
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  Speaker 7: make sure that they're in the best financial health that
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  Speaker 7: could be.
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  Speaker 5: And how have MUNI has been performing compared to treasuries?
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  Speaker 7: You know, well, I mean I think that the way
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  Speaker 7: we look at it, it's when issuers are coming to
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  Speaker 7: market and what the performance of municipal bonds are, we're
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  Speaker 7: going to have an investor come speak a little bit
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  Speaker 7: later today, I think, and the relative performance has been
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  Speaker 7: really quite quite robust, and I think that's going to
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  Speaker 7: sort of all going into the next year.
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  Speaker 2: Talk to us about this credit quality of the municipal
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  Speaker 2: bond market. I haven't really heard or seen or read
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  Speaker 2: about major blow ups, whether it was years ago Puerto
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  Speaker 2: Rico or Chicago or just Illinois in general. Quite frankly,
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  Speaker 2: we haven't really seen that too much.
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  Speaker 7: So I think massive individual credit problems is not what's
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  Speaker 7: happening at the moment. I think what you're going to
• 14:09
  Speaker 7: see happening, what we feel is happening, is a greater
• 14:13
  Speaker 7: differentiation among credits. So, for example, if you take healthcare,
• 14:20
  Speaker 7: there are lots of very big financial hospital systems, large
• 14:25
  Speaker 7: single hospital institutions, and a lot of small rural hospitals.
• 14:29
  Speaker 7: How they're going to be affected by what happens to
• 14:32
  Speaker 7: Medicare and Medicaid payments and how technology changes the way
• 14:37
  Speaker 7: healthcare is delivered is going to create a different sense
• 14:41
  Speaker 7: of who the winners are and who the losers are
• 14:43
  Speaker 7: would be a good example of that.
• 14:44
  Speaker 5: Are you expecting a slowdown by the end of the year,
• 14:47
  Speaker 5: maybe November? Do things tend to I think the end
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  Speaker 5: of the year.
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  Speaker 7: I think you're right. I think a volume will tail
• 14:53
  Speaker 7: off in the fourth quarter. Usually does unless there's a
• 14:56
  Speaker 7: change in the tax law. But one of the important
• 14:58
  Speaker 7: things that happened earlier this year was that when the
• 15:01
  Speaker 7: Big beautiful bill was passed, tax exemption I meannessial bonds
• 15:06
  Speaker 7: really was not affected. So that enabled at the beginning
• 15:09
  Speaker 7: of the year, if you think issuers were trying to
• 15:11
  Speaker 7: come to market, to try to because they weren't sure
• 15:14
  Speaker 7: what the outcome is going to be, and then later
• 15:16
  Speaker 7: the market environment was so favorable that they continued to
• 15:19
  Speaker 7: participate in the market to bring their new issues to market.
• 15:23
  Speaker 7: We'd see going forward if interest rates continue to decline,
• 15:28
  Speaker 7: you probably have a better idea of what's going to
• 15:29
  Speaker 7: happen tomorrow than I do. But if you think about
• 15:34
  Speaker 7: that effect, there'll be a greater number of refinancings as well.
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