Postal Service sees fiscal second quarter revenue gain and further net losses

Given that the ongoing COVID-19, or coronavirus, pandemic has largely wreaked havoc on the United States economy, fiscal second quarter results for the financially beleaguered United States Postal Service (USPS) somewhat surprised to the upside.

Quarterly revenue—at $17.8 billion—headed up $348 million on an annual basis.  But, despite the revenue gain, volume declined, falling 2.3% to 34,013 total pieces, and total operating expenses—at $22.3 billion—were up$2.8 billion, or 14.2%.  

“Secular declines in mail have continued to negatively affect mail and volume, and the Postal Service believes those declines will be exacerbated by the effects of the COVID-19 pandemic,” said USPS officials.

They also explained that COVID-19 initially began to impact operations in mid-March, as volumes saw further declines, and have worsened since that time. What’s more, USPS said that it estimates the effects of COVID-19 “will substantially increase the Postal Service’s net operating loss over the next eighteen months” and threaten its ability to operate.

First Class Mail, which has been hampered for several years because of an ongoing migration from mail to electronic communication and transaction alternatives, saw revenue head up 1.4%, or $89 million, to $6.375 billion, even though volume fell by 29 million pieces, or 0.2%. USPS officials attributed this growth to one-time mailings related to the U.S. 2020 Census, adding volumes would have been down otherwise. Marketing Mail dropped by 2.5%, or $94 million, with volume off 3.4% or 604 million pieces.

The USPS’s Shipping and Packages group, which has been a standout, of sorts, for the organization, through its services which directly benefit shippers, including Priority Mail, Priority Mail Express, Parcel Select, Parcel Return, and First-Class Package Services for Retail and also Commercial, as well as its successful efforts to compete in shipping services such as ‘last-mile’ e-commerce fulfillment markets and Sunday delivery, as well as end-to-end markets, although the rate of growth is slowing, had a growth quarter overall.

Revenue for the group headed up by $386 million, or 7.1%, to $5.821 billion, with volume up 12 million pieces, or 0.8%, to 1.484 million. And USPS said that revenue and volume are expected to continue, due to what it called a surge in e-commerce resultant of ongoing shelter-in-place orders, quarantines, travel, and logistics restrictions related to COVID-19.

Jerry Hempstead, president of Hempstead Consulting, observed that while Shipping and Packages volume only increased by 0.8%, revenue headed up 7.1%, validating the USPS’s January parcel rate increase.

“It did what it was supposed to do,” he said, but noted it is a different story for First Class Mail. “As more and more of us pay our bills online the need to get First Class Mail to the house diminishes. So, the further decline of First Class Mail is inevitable. With more and more of us spending time on social media, more advertising dollars are going there rather than physical pieces. Advertising mail should also continue to decline, and those dollars [will be] devoted to advertising on the Internet, which is better for the environment in the end.” 

While the USPS Shipping and Packages group has seen growth, USPS said that it does not expect package revenue growth over the medium to long term to offset its ongoing losses in mail revenue due to COVID-19.

The fiscal second quarter net loss for the USPS—at $4.5 billion—was steeper than the $2.1 billion net loss from a year ago. But that loss is magnified, with as further declines are expected, with its business expected to suffer “potentially dire consequences over the remainder of the year,” which were felt over the last two weeks of March, according to outgoing Postmaster General and CEO Megan Brennan.

“At a time when America needs the Postal Service more than ever, the pandemic is starting to have a significant effect on our business with mail volumes plummeting as a result of the pandemic,” said Brennan in a statement. “As Congress and the Administration take steps to support businesses and industries around the country, it is imperative that they also take action to shore up the finances of the Postal Service, and enable us to continue to fulfill our indispensable role during the pandemic, and to play an effective role in the nation’s economic recovery. We are grateful for the heroism and commitment of our 630,000 postal employees who continue to serve the American public during this pandemic, and we look forward to working with policymakers on ensuring the solvency of the Postal Service.”