USPS Loses $2.3B in Third Quarter Amid Newly Ominous Signs For Its Business
The Postal Service saw a drop in its shipping and package business for the first time in nine years.
The U.S. Postal Service announced a net loss of $2.3 billion in the third quarter of fiscal 2019, with shipping volume decreasing across its suite of offerings for the first time in nearly a decade.
There were few bright spots for the mailing agency, which saw $1.1 billion in “controllable” losses in the April-to-June period, a 24% increase over those same months in fiscal 2018. Controllable income does not account for expenses beyond the influence of USPS managers, primarily a congressional mandate to prefund retiree health benefits and adjustments to workers’ compensation costs. USPS also saw a rare downturn in shipping volume, which dropped by 47 million pieces compared to the same period last year.
It was the first quarterly volume decline for packages in nine years, USPS Chief Financial Office Joe Corbett said. Companies like Amazon are increasingly establishing their own networks for last-mile delivery, damaging the Postal Service’s Parcel Select business. Postmaster General Megan Brennan acknowledged there is an increase in competition but told reporters on Friday she was still confident her agency is “well positioned” to grow that part of its business due to its predictable service, high visibility and low price point.
“We’re out there competing for business every day,” Brennan said.
USPS still grew its shipping and package revenue by nearly 5% in the quarter, and that line of business has grown by more than $1 billion since the start of the fiscal year.
Total revenue stayed virtually even in the quarter, though operating expenses grew by 4%. USPS said its controllable costs increased by just 1.2%.
Volume dropped across the board for the Postal Service, with periodical mail falling the most dramatically at 13%.
Brennan and Corbett said they are continuing to take an aggressive approach to streamline their business and reduce expenditures, including by reducing labor costs with fewer total work hours. They continued to push for legislative reform from Congress and regulatory relief that provides more flexibility in setting prices.
“While our financial problems are serious, they are solvable,” Brennan said.
She is still working on a 10-year business plan for the agency, noting she will seek input from its newly confirmed board members before finalizing the strategy. The USPS board of governors recently regained a quorum for the first time in five years after the Senate confirmed three of President Trump’s nominees. Key members of Congress have threatened to withhold their support for any legislative efforts to give the Postal Service its requested reforms until they review the business plan. A draft of the plan on which Brennan has already briefed members of Congress suggested dramatic cuts to postal employees’s pay, leave and benefits.
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