USPS sees declines in fiscal second quarter revenue and volume

Revenue, at $17.1 billion, while down $16 million, was essentially flat, according to USPS officials, and the organization had a net loss of almost $2.3 billion, which was up $767 million annually. USPS said that this tops net loss of nearly $1.5 billion a year ago, with controllable loss for the quarter almost $1.1 billion, compared to a controllable loss of $889 million for the same quarter last year.

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Fiscal second quarter earnings issued late last week by the United States Postal Service (USPS) told an ongoing story, with a focus on a difficult financial situation.

Revenue, at $17.1 billion, while down $16 million, was essentially flat, according to USPS officials, and the organization had a net loss of almost $2.3 billion, which was up $767 million annually. USPS said that this tops net loss of nearly $1.5 billion a year ago, with controllable loss for the quarter almost $1.1 billion, compared to a controllable loss of $889 million for the same quarter last year.

For its key service offerings, USPS reported the following:

  • First Class Mail revenue fell $98 million, or 1.6%, to $5.859 billion, with volume down 361 million pieces, or 2.7%, still reflecting the ongoing migration from mail to electronic communication and transaction alternatives;
  • Marketing Mail revenue, fell $121 million, or 3%, to $3.861 billion, with volume down by 878 million pieces, or 4.7%, due largely to customers moving over to alternatives like digital advertising; and
  • Shipping and Packages revenue at $5.416 billion, was up $250 million, or 4.8%, despite a 3.2%, or 47 million pieces, decline in volume

“We continue to face imbalances in our business model that must be fixed through legislative and regulatory change. As we work to effectuate that change, we continue our ongoing aggressive management actions, and remain focused on delivering for the American public, and meeting their evolving business and residential needs," said Postmaster General and Chief Executive Officer Megan J. Brennan in a statement. "We are actively adapting to changes throughout the mailing and shipping landscape, providing customers with new solutions that add value for their investment, improve the service we provide, and drive internal efficiencies."

And Joe Corbett, USPS CFO, noted that the USPS continues to focus on maximizing productivity, explaining that while many of the USPS’s network costs are fixed to meet its universal service obligations, it reduced work hours by approximately 1.7 million relative to the same quarter last year.

In its 10-Q filing, the USPS explained provided updates for various market segments.

Addressing First Class Mail, USPS said that it anticipates the segment to continue to lose volume in the coming years, due to the ongoing migration to electronic communication and transactional alternatives resulting from technological changes. In order to address this long-term trend, it said that it has been working with the mailing industry to slow the decline through mailing promotions and leveraging the high open-and-red rates for items like bills and statements for additional customer engagement and education.

On the Marketing Mail side, USPS said that it is expanding services like Informed Delivery, which enables customers to preview mail and manage packages scheduled to arrive as a means of merging digital and physical mail.

USPS’s said its Shipping and Packages group has historically shown revenue and volume growth as a result of its successful efforts to compete in shipping services, including last-mile e-commerce fulfillment markets and Sunday delivery as well as end-to-end markets.

“However, our Shipping and Packages category is subject to intense competition which significantly impacts both revenue and volume,” it said. “Certain major customers have recently begun diverting additional volume from our network by in-sourcing the last-mile delivery. These customers are also aggressively pricing their products and services in order to fill their networks and grow package density. In January 2018, we implemented price increases on certain Market-Dominant and Competitive services by an average of 1.9% and 4.1%, respectively. In January 2019, we implemented price increases for certain Market Dominant and Competitive services by an average of 2.5% and 7.4%, respectively. In late June 2019, we implemented dimensional weighting provisions that amount to price increases for certain Shipping and Packages subcategories.”

Jerry Hempstead, president of Hempstead Consulting, said that while volumes for First Class, Marketing Mail, Periodicals, and Shipping and Packages are all negative, it is interesting that parcel volumes dropped significantly, even though revenue associated with that volume increased significantly, which he said is a byproduct of charging much more than it did a year ago and resulted in more revenue on fewer packages.

“Obviously, the USPS did a horrendous job managing its costs to be in line with all these fewer pieces they were handling and the net loss increased significantly,” he said. “It’s not all to blame on the inaction of Congress this go round. The government is so inured to spending more than it takes in that the Hill I think just yawns at the losses over at L’Enfant plaza. The Treasury isn’t going to haul the USPS to court demanding its money. The big question to be answered is where did all the USPS packages go? Is Amazon delivering more on its own vehicles? Is UPS diverting more of its SurePost to its own drivers for last mile, similarly is FedEx diverting parcels from its SmartPost to its own driver network? And did the pricing changes imposed by the USPS on parcels this year drive units to other methods like regional carriers as well as the integrators? I’m sure it’s an accumulation of factors that explains the decline of parcel piece count at the USPS, because it’s not being seen yet in data from the other major players.” 

About the Author

Jeff Berman, Group News Editor
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman

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