A growing package and shipping business, steady volumes in Standard Mail, and the 4.3% exigent surcharge helped limit third-quarter losses at the U.S. Postal Service to $586 million, $1.4 billion less than what USPS lost during the same period last year.
First Class Mail and Standard Mail volumes dropped 2.6 and 2.1%, respectively, during the three-month period ended June 30, traditionally the weakest-performing quarter in the Postal Service’s fiscal year. But Standard Mail’s nine-month revenue contribution of $60.6 billion represented a slight increase over last year’s total.
“Standard mail consistently retains its value and earns its share of marketing budgets,” said Postmaster General Megan Brennan in an earnings call this morning.
On volume growth of more than 10%, shipping and package revenue rose 13.4% to just over $1 billion for the quarter. But more package business meant greater labor expenditures, adding to a $256 million increase controllable operating expenditures for the quarter.
Brennan laid out a three-part strategy for building on the momentum of package delivery services. She said that USPS was continuing to invest in new management processes and equipment and that it would proceed to run pilots like its current grocery and Sunday Amazon delivery programs. Continuing emphasis, she said, would be placed on enhanced digital and mobile programs for customers, such as the Real Mail Notification pilot that will launch this October in New York.
“We’re seeing a continuation of larger trends,” Brennan said. “The marketplace for delivery services is dynamic, to say the least. It’s attracting new companies and startups aiming at providing last-mile delivery.”
Postal Service CFO Joe Corbett reported that controllable income (excluding legislative mandates such as healthcare pre-funding) for the nine months was $1.2 billion, a 20% increase over the previous year’s period. USPS currently has 26 days of operating cash on hand, seven days more than it did last year at this time, but still dangerously low. “Without legislation addressing retiree benefits, we may again be forced to default on our next pre-funding payment,” Corbett said.
The Postal Regulatory Commission (PRC) recently increased by $1.2 billion the total that USPS will be allowed to collect via the exigent surcharge, extending its run through April 2016, Corbett estimated. After that, the added revenue stream will go away—unless legislation such as that proposed by Sen. Tom Carper (D-DE) can be enacted.
“We do appreciate the PRC providing that extra pricing relief. That said, in terms of legislation, the cornerstone of any reform is resolving the RHB pre-funding and instituting Medicare,” Brennan said. “We’re having productive conversations [about reform] with the respective unions and stakeholder associates—as well as on the Hill. But with a national election approaching, we have a compressed calendar to work with.”
