USPS reports mixed fiscal first quarter earnings

Fiscal year 2023 first quarter earnings results, for the United States Postal Service (USPS), which were issued yesterday, saw a 1.0%—or $206 million—increase in operating revenue, to $21.5 billion, with volumes down 1.7 billion pieces—or 4.8%—annually.

“We are making demonstrable progress with our Delivering for America plan. We continue to focus on service reliability for the American public as we modernize our outmoded and aging postal network to move mail and packages in an integrated network and deliver to nearly 165 million delivery points six days a week while covering our costs,” said Postmaster General and CEO Louis DeJoy, in a statement. “Our initiatives in cost reduction and revenue growth are underway. However, in addition to facing the same inflation and other post-Covid economic realignment issues that every business is facing, we continue to operate in an administrative environment beyond our control that slows the pace of improvement.”

While operating income increased, USPS said that it had a $1.0 billion net loss, which it said was a $519 million decrease in net loss compared to a $1.5 billion net loss, for the same quarter a year ago.

Revenue for the organization’s Shipping and Packages group was up 2.4%, or $203 million, to $8.84 billion, with volume down 70 million pieces, or 3.5%. USPS officials noted that the volume decline continues to highlight what it called a continued abatement of the pandemic-related surge in e-commerce, even though volume remains above pre-pandemic levels.

Looking at the units within the Shipping and Packages group, Priority Mail Services revenue was down 6.8%, to $3.617 billion, with volume down 12.2%, and Parcel Services revenue was up 12%, to $2.892 billion, with volume up 1.2%. First-Class Package Services revenue, at $2.097 billion, was up 5.7%, with volume down 4%, and Package Services revenue, at $234 million, was down 1.3%, with volume down 13%.

USPS officials said that despite the volume decline in the short-term as the e-commerce market stabilizes, it believes consumer behavior has evolved during the pandemic and its Shipping and Packages volume is not expected to return to the lower pre-pandemic levels, as the nation has increasingly relied on the safety and convenience of ecommerce.

“Our Shipping and Packages business continues to reflect the result of our successful efforts to compete in shipping services, including ‘last-mile’ e-commerce fulfillment markets and Sunday delivery, as well as end-to-end markets, driven by consumers' continued use of online shopping,” they said. “We have increased Sunday delivery service for some of our customers in limited U.S. markets. We also continue to focus on responding to customers' needs by implementing marketing campaigns and maintaining strategic business partnerships that help us capitalize on the growing e-commerce business. However, our Shipping and Packages category is subject to intense competition which significantly impacts both revenue and volume. While the surge in e-commerce growth driven by the pandemic, resulted in certain major customers temporarily increasing their volume to our network due to their delivery capacity constraints, these customers have returned to diverting volume from our network by in-sourcing the last-mile delivery and aggressively pricing their products and services in order to fill their networks and grow package density.”

First-Class Mail and Marketing Mail revenue came in at $6.5 billion (down 1.5% annually) and $4.3 billion (down 2.4% annually), respectively, with volumes down 4.5%, for First-Class Mail and 4.7%, for Marketing Mail.

John Haber, chief strategy officer for transportation and logistics services provider Transportation Insight, said that the USPS’s 10-year strategic plan, which was rolled out in 2021, serves as a roadmap to help guide its delivery performance, technology, and workforce to meet the constantly changing buying characteristics of both consumers and companies.

“It shows USPS as both comprehensive and ambitious with respect to service standards, delivery offerings, dynamic pricing, technology, capital investments, and the stabilization of the workforce,” he explained. “The most recent comparative tracks demonstrate significant gains within a variety of these categories compared to 2021. For example, average first-class mail and package delivery is 2.5 days. When comparing on time deliveries against service standards in 2022 vs. 2021, first class mail/packages stand at 91% vs 82.7% last year at this time. Entering the 2022 peak season post COVID was clouded with recession fears, higher interest rates, and uncertainty to consumer buyer power and attitudes. Yet, USPS has demonstrated progress and determination against their Plan but will need to remain resilient to stay on path. There has been improvement made within the Postal Service Reform Act as it requires the Office of Personnel Management to enroll in Medicare when eligible. It is an important step for USPS to continue to make strides and to provide them with significant financial relief by dropping the unfair mandate to pre-fund its employees retirement health benefits.”