USPS FY 2019 earnings see further declines

The bottom line for the United States Postal Service (USPS) remained in a precarious position, for fiscal year 2019, according to data it released today.

Operating revenue, at $71.1 billion, rose $514 million annually, and was paced by price increased and ongoing strength in its Shipping and Packages business. But it saw a loss of $3.4 billion, or $1.5 billion more than fiscal year 2018, and its net loss for the year, at $8.8 billion, was $4.9 billion steeper on an annual basis. USPS said $3.4 billion of this net loss is due to the impact of discount rate changes in its workers’ compensation expense.

For its key service offerings, USPS reported the following:

• -First Class mail revenue fell $514 million, or 2.1%, with volume down 3.1%, due to an ongoing migration from mail to electronic communication and transaction alternatives;
• -Marketing Mail revenue fell $153 million, or 0.9%, with volume down 2.1%, with USPS saying these numbers were boosted by an increase in political election mail of around $100 million in revenue and 630 million pieces in volume; and
• -Shipping and Packages revenue headed up 6.1%, with volume up 0.3%, accounting for 32% of USPS operating revenue and 4.3% of total volume

In its Form 10-K statement, USPS said its Shipping and Packages business has continued to show solid revenue growth as a result of its 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, which provided a surge in package volume with a record number of packages delivered during both the calendar year 2018 and 2017 holiday seasons.

“To accommodate the surge in volume and to avoid service disruptions during the peak holiday 2019 seasons, we increased Sunday delivery service for some of our customers in limited U.S. markets and added non-career employees for the peak seasons in accordance with our labor agreements,” it said. “In 2019, the rate of volume growth slowed significantly. The reasons for the slowing growth rate are: 1) strong competition, 2) growing package density leading some large shippers to divert volume away from us by in-sourcing the last-mile delivery, and 3) a narrowing of the shipping cost differential between us and our competitors due to several years of above-average price increases.”

Postmaster General Megan J. Brennan said in a statement that the USPS continues to adjust to declining mail volume and remains focused on leveraging its unique and unrivaled approach to gain new customers and grow profitable revenue in the increasingly competitive package business.

“However, revenue growth in our package business 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,” Brennan said.

An industry observed told LM that with the likely driver for slowing package volume is due to Amazon delivering more and more of its own packages on its own network and FedEx and UPS diverting final delivery to their own vehicles as well.