The U.S. Postal Service announced a significant dip in revenue and controllable income in the first quarter of fiscal 2017, leading to a net loss of $200 million after excluding a positive adjustment in interest rates.
After posting its first quarter in the black in five years during the same period last year, USPS saw its profits shrink in large part due to the forced rollback of a temporary price surge. The Postal Service technically was again in the black for the quarter, as a fluctuation in its workers’ compensation liabilities led to $1.7 billion coming off of its books. Chief Financial Officer Joe Corbett said those changes were just “noise” in the agency’s financials.
Controllable profits -- in which USPS excludes items that are out of management's hands, such as non-cash workers’ compensation -- shrunk by $735 million over the same period last year, when the Postal Service earned $1.1 billion. Total revenue decreased by $200 million to $19.2 billion between Oct. 1 and Dec. 31, 2016, driven down by the expiration of the exigent surcharge. If the price increase were still in place, then USPS would have brought in an additional $570 million in the quarter, Corbett said.
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The Postal Service typically enjoys its best performance of the year during its first quarter, as the holiday season provides a major boost to shipping.
Package and shipping revenue continued to grow, up $700 million and 15 percent from the same period in fiscal 2016. That quarter had been a record for the Postal Service, and it still outperformed its previous high-water mark in the category by 11 percent in volume. The agency’s biggest moneymaker, single-piece first class mail, continued its decline, with volume dropping 5 percent since last year. Marketing mail, however, jumped by 1 percent.
The Postal Service’s controllable expenses spiked by one-third, increasing $600 million in the quarter. Corbett attributed the majority of those costs to increases in compensation and benefits, as well as an uptick in transportation expenses.
Postmaster General Megan Brennan testified during a House Oversight and Government Reform Committee hearing this week, imploring lawmakers to finally follow through on the long sought after goal of postal reform. New overhaul legislation appeared to pick up momentum at the hearing, with unions, large mailers, Democrats, Republicans and postal management itself all endorsing the bill.
"Our current financial situation is serious, but solvable," Brennan said Thursday. With legislation, pricing reforms from the Postal Regulatory Commission and aggressive management actions, “the Postal Service would return to financial stability,” she said.
The Postal Service spent years building consensus for reform, she added, “capable of sustaining broad support.” The current legislation reflects those efforts.
Fredric Rolando, president of the National Association of Letter Carriers, said the continued profitability in the “controllable” part of USPS’ business shows a “continuing financial upswing.”
Rolando added: “These results reflect ongoing trends -- stabilizing letter revenue as the economy gradually improves from the worst recession in 80 years and rising package revenue driven by online shopping.”