The US Postal Service delivered 16% more parcels during the 2015 peak holiday shipping season thanks to booming e-commerce business, helping to generate an overall 3.3% revenue increase in the October – December quarter.
The postal operator’s revenue rose by $613 million to $19.3 billion in the first quarter of its 2015/16 fiscal year, driven by the record volume of packages delivered during the 2015 holiday season as well as a special surcharge, it announced this week.
“Shipping and Package revenue grew 13.5% over the same period last year, and was particularly strong during the holiday shipping season. We projected and delivered more than a 16% increase in package volume,” said Postmaster General and Chief Executive Officer Megan J. Brennan. “We continue to grow our e-commerce business and remain focused on delivering the best value for our customers.”
USPS generated Shipping and Package revenues of $4.76 billion in the October – December quarter, up from $4.2 billion one year earlier, while volumes increased to 1.45 billion parcels compared to 1.25 billion in the first quarter of the previous fiscal year. The business now accounts for 25% of overall revenues.
The flagship Priority Mail service, providing day-definite parcel delivery, increased volume by 6.4% and revenue by 5.7% to $2.34 billion in the quarter. The low-price Parcel Select, Parcel Return and Standard Parcels products for larger parcels increased volumes by 27% and revenues by 36% to $1.3 billion, while First-Class Packages, targeting small lightweight packages, increased volumes by 8.1% and revenues by 14.7%.
Outlining some of the main business trends in the peak quarter, USPS commented in its Q1 report that Shipping and Packages revenue “continued to show solid volume growth as a result of our successful efforts to compete in the ground shipping services and “last mile” e-commerce fulfilment markets which include Sunday delivery growth. Volume also experienced end-to-end growth as consumers continued to utilize online shopping, which provided a surge in package volume with a record number of packages delivered during the calendar year 2015 holiday season.”
Meanwhile, the dominant mail business saw a slight revenue fall of only $124 million to $12.46 billion in the quarter, with first-class mail volumes down by 2.2% and standard mail by 3%. Moreover, overall operating expenses were reduced by 2.4%, or $473 million, to $19 billion.
As a result, USPS reported a small net profit of $307 million in the quarter compared to a loss of $754 million in October – December 2014. This $1.1 billion improvement was most significantly impacted by a $1.2 billion favourable change in the workers' compensation expense as a result of interest rate changes, a factor outside of management’s control.
Moreover, excluding the disputed health benefits payments and certain other costs, the postal operator improved its Q1 “controllable income” to $1.26 billion from $1.12 billion in the previous year.
"While net income is favourable compared to a net loss, it unfortunately does not reflect the end of our losses," said Chief Financial Officer and Executive Vice President Joseph Corbett. "Excluding the favourable impact of interest rate changes and the exigent surcharge, the organization would have actually reported a net loss of approximately $700 million in the first quarter. Absent legislative reform, the exigent surcharge is expected to roll back in April, and our losses will increase by approximately $2 billion per year."
Brennan emphasised: “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.”
Efforts to find cross-party support in Congress for postal reform have been blocked in recent years, however.
