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USPS' Fiscal 2019 Package Volumes Hits Flat Notes

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USPS' Fiscal 2019 Package Volumes Hits Flat Notes

The U.S. Postal Service (USPS) reported Thursday morning a low single-digit increase in operating revenue for its 2019 fiscal year as year-over-year shipping and package volumes stagnated at levels not seen in years.

USPS posted operating revenue of $71.1 billion, a $514 million increase from fiscal year 2018. Its net loss widened to $8.8 billion from $3.9 billion. About $3.4 billion of the additional $4.9 billion deficit was due to interest rate changes affecting workers' compensation expenses, USPS said. The $3.4 billion loss was recorded as a non-cash expense. USPS said its "controllable loss" – defined as expenses within its control – widened to $3.4 billion from $1.9 billion.

For the year, shipping and package volumes rose a scant 0.6% to 6.16 billion pieces. Revenues increased 6.1%, reflecting the impact of price increases on that traffic, USPS said.

The quasi-governmental agency did not break out fiscal fourth-quarter results in its announcement. Package and shipping volumes declined in the fiscal third quarter for the first time in nine years. The flat full-year volumes came as USPS' three largest customers for its popular "Parcel Select" last-mile business – UPS Inc., (NYSE: UPS); FedEx Corp. (NYSE: FDX) and Amazon.com, Inc. (NASDAQ: AMZN)– diverted more of that traffic into their own networks. 

Under Parcel Select, customers induct parcels deep into the USPS' delivery infrastructure, and letter carriers transport them to their destinations. By law, USPS must serve every U.S. address, and businesses seeking low-cost distribution options rely on it to deliver shipments that they need not handle themselves.

Postmaster General Megan J. Brennan, who will retire on Jan. 31, said in a statement that progress in the package segment will not make much of a dent in USPS' overall financial picture. Package revenue "will never be enough to offset imbalances in the Postal Service's business model, which must be addressed through legislative and regulatory reforms in order to secure a sustainable future," she said.

USPS labors under a $5.5 billion annual Congressionally mandated burden of pre-funding  retirees' medical benefits. USPS' other cross to bear is the secular decline in first-class mail, its core business and its most profitable. First-class mail volumes fell by 1.8 billion pieces in fiscal 2019, while marketing mail dropped by 1.6 billion pieces. Both segments have been hit very hard by the shift to digitization, which has reduced demand for physical mail distribution.

Image Sourced from Pixabay

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