A customer walks into a UPS store on July 05, 2023 in Austin, Texas.

Brandon Bell | Getty Images News | Getty Images

United Parcel Service on Tuesday cut its 2023 revenue and margin forecast, hurt by softening e-commerce demand and an improved labor contract it offered workers, sending its shares down 6.6% in premarket trading.

UPS and the Teamsters union signed a tentative five-year contract deal last month for about 340,000 U.S. workers to avert a strike that could have cost the economy billions and disrupted a quarter of the nation’s package shipments.

The agreement included wage hikes for UPS workers, another paid holiday, end to a two-tier wage system for drivers and air conditioning to new models of the company’s ubiquitous brown trucks. It also eliminated a two-tier pay system and forced overtime for delivery drivers.

Meanwhile, the global shipping downturn, which has hurt margins for the sector, has forced logistic firms to balance costs and capacity to lower demand.

The world’s biggest parcel delivery firm has in recent quarters benefited from a strong focus on moving high-margin parcels, in a further attempt to shield profit.

UPS now expects 2023 consolidated revenue to be about $93 billion, compared with a prior forecast of about $97 billion.

The company expects full-year adjusted operating margin of around 11.8%, compared to its prior forecast of about 12.8%.

Its second-quarter revenue fell about 11% to $22.1 billion. The company posted a per-share profit of $2.42 compared with $3.25 per share a year ago.

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