The U.S. Postal Service achieved double-digit growth in its package business in the year ending September 30, 2015, and expects similar peak season growth, but recorded another high overall net loss of $5.1 billion due to heavy financial benefits payments.
The US postal operator increased revenues by a slight 1.6% to $68.93 billion in the 2014/15 fiscal year. First-Class Mail volume dropped by 2.2% and revenues declined slightly to $28.3 billion, while Standard Mail volume decreased by 0.3% but revenue increased slightly to $17.65 billion.
Shipping & Packages Services was the main growth business with revenues up 11.4% to just over $15 billion while volumes increased by 14.1% to 4.5 billion items, driven mostly by e-commerce growth. The flagship product, Priority Mail, grew to volumes of over one billion pieces and revenues of $7.75 billion
This growth in packages is expected to continue during the 2015 holiday season with projected volume growth of 10.5% to some 600 million packages for delivery between Thanksgiving and New Year’s Eve.
USPS will again deliver packages seven days a week in select major cities and high-volume areas beginning Nov. 29, for the four Sundays before Christmas. In addition, it will offer real-time delivery notifications, meaning customers who sign up for alerts at myusps.com will receive notification within a few minutes of the delivery scan for select packages.
“Customers can count on the Postal Service and our more than 600,000 dedicated employees to deliver their holiday gifts, cards and letters,” said Megan J. Brennan, Postmaster General and CEO. “We have been investing in our infrastructure including package sortation equipment, new delivery vehicles and scanning technology to expand our capacity, improve operating efficiency and provide real-time visibility.”
Meanwhile, USPS’s operating expenses increased by 0.9% to $73.8 billion in the year ending September 2015, with ‘controllable’ costs up 1.9% at $67.6 billion and ‘non-controllable’ costs down 9% to $6.3 billion. This means there was a ‘controllable’ operating profit of $1.2 billion. Controllable income is defined as net loss excluding expenses related to the mandated prefunding of retirement health benefits, actuarial revaluation of retirement liabilities and non-cash workers’ compensation adjustments, which are factors largely outside of management’s control.
Overall, however, USPS closed the year with a net loss of $5.06 billion, down from $5.5 billion in 2014.
“We achieved controllable income in excess of $1 billion for the second consecutive fiscal year giving us some limited flexibility to make critical investments in the future of the organization,” said Postmaster General and CEO Megan J. Brennan. “To maintain this success we will need to continue our efforts to grow the business and drive operational efficiencies. However, we will also need the enactment of legislation that makes our retiree health benefit system affordable and that provides increased pricing and product flexibility.”
However, despite the year-over-year improvement in revenue and a second year of controllable income in excess of $1 billion, the Postal Service continues to operate under substantial financial pressure which demonstrates the need for legislative reform. Large net losses continue, and controllable operating expenses increased $1.3 billion from last year. This was the result of a combination of factors, including higher compensation costs attributable to increased benefits expenses and additional work hours partly associated with growth in the more labour-intensive shipping and package business.
“Adding to the financial pressures that the Postal Service will face in the short term is the fact that the exigent surcharge authorized by the Postal Regulatory Commission in 2014 will need to be rolled back in approximately April of 2016,” said Chief Financial Officer and Executive Vice President Joseph Corbett. “This surcharge has provided an additional estimated $3.5 billion in revenue since its inception, and will provide a total of $4.6 billion in additional revenue at the time when the commission will require us to eliminate the surcharge.”
