By Ben Glickman


UPS said it would pay nearly half of the annual wage increases from its recently ratified five-year Teamsters contract in the first year.

The Atlanta-based package-delivery company said Monday in an investor presentation that 46% of the wage increases over the course of the contract will come in the first year of the deal. Chief Financial Officer Brian Newman said the contract will cost about $500 million more in the back half of 2023 than the company had planned, but the annualized growth rate for costs was in line with expectations.

UPS said the new agreement would cause contract costs to increase at a 3.3% compound annual growth rate over the length of the contract.

Wage costs will rise at a 3.5% CAGR over five years, while health and benefits costs would increase at a 2.7% CAGR.

Newman said in recorded remarks the frontloaded structure of the wage increases would allow the company to invest in technology and would lower turnover costs.

Wall Street's estimates for the second half of the year hadn't taken into account these additional costs, he said.

Most of the costs would be shouldered in the third quarter, according to Newman, while Wall Street estimates assume the costs will be spread out across the third and fourth quarters.


Write to Ben Glickman at ben.glickman@wsj.com


(END) Dow Jones Newswires

09-11-23 2016ET