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USPS Looks to New Shipping Services Amid Q1 Losses

Top officials at the U.S. Postal Service are looking to the shipping and Standard Mail lines of business to help the cash-strapped agency offset sustained declines in First Class Mail.

Buoyed by double-digit growth in shipping and package volume, the Postal Service on Friday reported a net revenue increase of 4.3 percent for the first quarter of fiscal 2015.

Overall, however, the Postal Service posted a net loss of $754 million in the first quarter of fiscal 2015, the period from Oct. 1, 2014 through Dec. 31.

Looking forward, newly minted Postmaster General Megan Brennan anticipates continued growth in the shipping business, which, along with the advertising-driven Standard Mail, was a major bright spot amid all the red ink on the agency’s balance sheet.

Speaking on a conference call with reporters, Brennan said that the Postal Service intends to refurbish pieces of its infrastructure like facilities and its fleet of trucks, but that it also needs to continue pushing out experimental new services and expanding existing ones as ecommerce becomes an increasingly central part of the business.

“Investment in the future goes beyond capital investment – it’s also tied to innovation,” Brennan said.

While First Class mail volume declined marginally in the most recent period, the major drivers of the net loss were a prefunding requirement for retirees’ health benefits and increased expenses relating to the workers’ compensation system.

Brennan and Chief Financial Officer Joseph Corbett made another appeal for Congress to take up legislation that would overhaul those programs and give the Postal Service more operating flexibility, warning that without structural reforms, the losses will continue to mount.

“We had a fantastic quarter in terms of items that the Postal Service can control,” Corbett said. “But we need to also not lose sight of the fact that our financial condition continues to deteriorate, and we’re in a deep financial hole.”

With all the financial obligations tallied up, Corbett said that the Postal Service is about $91 billion in the red.

“This continues to underscore that we need legislation … in order to right the ship,” he said.

In the meantime, the Postal Service is looking to build on experiments in shipping services already underway, including plans to expand a grocery-delivery service the agency is trialing in San Francisco to other markets.

Likewise, Brennan said that the Postal Service intends to continue to pursue same-day and Sunday delivery services, as well as exploring new, “custom” delivery services.

“In broad terms, we have a tremendous amount of momentum throughout the organization,” Brennan said. “Package delivery is clearly a growth opportunity for us.”

In the most recent quarter, which included the winter holidays and a busy campaign season, shipping and package volume jumped 12.8 percent from the same period a year ago, and Standard Mail volume was up 3.5 percent.

“A key driver of the growth was the record number of holiday season package deliveries,” Corbett said.

Volumes of First Class Mail, the Postal Service’s most profitable product, dipped 1.1 percent over the year-earlier period, which Corbett called the “lowest percentage decline in memory.”

Brennan touted the strong performance of Standard Mail, most of which is advertising, and in the most recent quarter included an increase of 900,000 million pieces of political mail. She said that the Postal Service will continue on its marketing campaign to promote paper ads as a natural and essential compliment to the digital channel.

“Going forward, we’ll continue to encourage the use of standard mail as a powerful marketing (tool), and then marry that with digital solutions,” she said.

Kenneth Corbin on Linkedin
Kenneth Corbin
Kenneth Corbin
Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects since 2007, most recently as the Washington correspondent for InternetNews.com, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn.