The US Postal Service ended its last quarter with a 1.3% rise in operating revenue driven by a 14.4% growth in shipping and package volume. However, the agency suffered a net loss of $1.5 billion, much of it due to a retiree health-benefit prefunding expense.
The report highlighted the importance of packages to counter the decline in first class mail, and much of the focus has been on ecommerce.
Representing the most significant change in revenue, Shipping and Packages revenue was $3.6 billion for the three months ended March 31, 2015, an increase of $342 million, or 10.4%, compared to the same period last year. Shipping and Packages volume was 1.1 billion pieces for the three months ended March 31, 2015, an increase of 138 million pieces, or 14.4%, compared to the same period last year.
In its coverage of the report, the Wall Street Journal noted, “In August, USPS won approval from its regulators to lower prices by as much as 58% on certain Priority Mail packages for customers shipping at least 50,000 parcels a year. USPS then started cutting prices to attract big ecommerce companies.”
The USPS said, “To address the impacts of the Great Recession and the long-term trend that technological change and the diversion to electronic alternatives have had on our First-Class Mail revenue and volume, which the Great Recession exacerbated, we have focused our efforts on providing new services, growing ecommerce and implementing marketing campaigns that have helped us grow our Shipping and Packages business.”
It pointed to its “Priority:You” campaign as an example of that strategy, which offers “day-specific delivery, improved tracking and text message alerts and up to $50 of free insurance on most Priority Mail packages.”
But while shipping and package volume and revenue demonstrated continued growth (14.4%), it only represented 22% of 2015 revenues.
First-Class Mail continued to decline (2.1%) during the second quarter year-over-year, but represents 41% of USPS revenue. Standard Mail volumes declined 1.1%.
The Postal Service reminded that price increases for all services in the First-Class Mail category are generally capped at the rate of inflation because these services are classified by law as Market-Dominant.
The USPS also said that the costs of providing Shipping and Packages services are substantially higher than costs associated with First-Class Mail. “As a result, we must earn $3 in Shipping and Package revenue to replace the profit lost from each $1 of First-Class Mail revenue.”
It was the first earnings presided over by the new Postmaster General Megan Brennan and covered the second quarter of its fiscal year – January through March, 2015.
“We’re pleased with the increase in our controllable net income compared to the same period last year, which demonstrates that our cost containment and revenue strategies are delivering results,” Brennan was quoted in the earnings press release. “We also took significant steps during the quarter to improve our long-term operating model, which will help drive greater long-term efficiencies throughout our network.”
More information about the USPS second quarter results is available on the USPS website.