Market Overview

US Postal Service Takes Another Billion-Dollar Hit

US Postal Service Takes Another Billion-Dollar Hit

The U.S. Postal Service (USPS) reported on August 9 a net loss of nearly $2.3 billion in its fiscal 2019 third quarter, an increase of $767 million from the same period in 2018 – and up from a $2.1 billion loss in the previous quarter – as its first-class and marketing-mail revenue continue to pressure operations.

The service reported total revenue of $17.1 billion in the quarter (April 1 – June 30), down $16 million, or essentially flat, from the same quarter last year.

One of the few bright spots for the agency continues to be shipping and packages revenue, which increased by $250 million, or 4.8 percent, despite a volume decline of 47 million mail pieces, or 3.2 percent, compared to 2018. Shipping and packages also grew as a percentage of total revenue year-on-year, from 29 percent in 2018 to 32 percent in the current quarter.

"We continue to face imbalances in our business model that must be fixed through legislative and regulatory change," commented Postmaster General and Chief Executive Officer Megan Brennan. "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."

First-Class Mail revenue declined by $98 million, or 1.6 percent, on a volume decline of 361 million mail pieces, or 2.7 percent, compared to the same quarter last year. Marketing Mail revenue declined by $121 million, or 3 percent, on a volume decline of 878 million pieces, or 4.7 percent, compared to last year. Periodicals revenue declined by $38 million, or 11.2 percent, on a volume decline of 173 million pieces.

So-called controllable expenses – costs that are within USPS' operating control – rose to $1.1 billion, compared with $889 million for the same quarter last year.

Breakdown of U.S. Postal Service FY3Q revenues. Source: USPS

Brennan warned of the increasing pressure on the postal service from competitors – which are also delivery partners – UPS Inc (NYSE: UPS) and FedEx Corp (NYSE: FDX). But she said the postal service was up to the challenge, noting the service's leadership in Sunday delivery.

In addition, "as online shopping continues to increase and customer expectations evolve, we will offer expanded shipping solutions that allow major mailers and customers to benefit from using the postal service," she said.

Brennan also said USPS has the ability to scale to meet market demands through its "unrivaled" network to benefit shippers, retailers and consumers. "We will continue to compete and retain customers by proving with every delivery and every interaction that we do an excellent job of serving their business needs."

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