USPS reports Q1 revenue gains

The United States Postal Service (USPS) reported today that it began fiscal year 2016 on a good note with $19.3 billion in revenue for a 3.3 percent, or $613 million annual gain.

Net income came in at $307 million, which was a major improvement in comparison to a $754 million net loss for the same period last year. This $1.1 billion difference was largely due to a $1.2 billion favorable change in the USPS’s workers compensation expense, due to interest rate changes, which the USPS said was outside of management’s control.

USPS pointed to ongoing growth in its Shipping and Package Group, whose primary offerings are comprised of Priority Mail, Express Mail, Parcel Select and Parcel Return services, as the key driver for the quarterly revenue gains.  Volume for the group saw a 16.2 percent annual gain at 1.447 billion packages, which slightly exceeded expectations heading into the holiday season, with revenue up 13.5 percent at $4.762 billion.

Much of the Shipping and Package Group volume was paced by e-commerce during the holiday season, with the USPS setting a new record for holiday seasonal packages delivered.

With Parcel Select, Parcel Return and Standard Parcel revenue up 35.8 percent or $345 million, revenue for Parcel Select was $1.3 billion, and Parcel Returns, and Standard Mail Parcels at $40 million and $15 million, respectively. While growth for these three offerings was up 27 percent annually, USPS and due mainly to e-commerce activity, USPS said that it also represents one of its lowest prices services.

What’s more, even though Shipping and Packages accounted for 25 percent of USPS revenue, it only represents 3 percent of total volume.

“Shipping and Package revenue grew 13.5 percent over the same period last year, and was particularly strong during the holiday shipping season. We projected and delivered more than a 16 percent increase in package volume,” said Postmaster General and Chief Executive Officer Megan J. Brennan in a statement. “We continue to grow our e-commerce business and remain focused on delivering the best value for our customers. Despite these achievements and the best efforts of our employees, our financial condition will worsen without legislative reform. Our financial situation is serious but solvable through the enactment of prudent legislative reform.”

USPS said that total mail volume of 41.88 billion pieces in the fiscal first quarter was down 1.9 percent annually, with First Class volume down 2.2 percent or 368 million pieces and Standard Mail volume down 3.0 percent or 675 million pieces.

First Class Mail revenue dropped 0.8 percent annually. USPS said this decline has been intact for several quarters an is due to ongoing trends in the mailing behavior or consumers and businesses resultant of the recession, and ongoing diversion from paper to electronic communications, including e-mailing business documents and online purchasing orders, as well as other electronic mailing processes.

Over all, the USPS remains hamstrung, due to the ongoing decline in First Class Mail, federally mandated payment obligations, and an inflexible business model, among other issues. And its exigent rate increase in the form of a 4.3 percent surcharge is set to expire in April.

A major obstacle in the form of the Postal Accountability Enforcement Act’s mandated Postal Service Retiree Health Benefits Fund continues to hinder the USPS’s financial viability, with $28.1 billion of prefunding payments that were due but unpaid from 2012-2015, along with the USPS accruing expenses of $1.5 billion for the fiscal first quarter and its required prefunding payment of $5.8 billion which is due by September 30. The USPS said it expects to default on this payment.