USPS reports first dip in package volume in nearly a decade

Agency Oversight

USPS reports first dip in package volume in nearly a decade

USPS posted a net loss of nearly $2.3 billion for this fiscal year’s third quarter, higher than the loss reported by the agency for the same period last year.

Jory Heckman@jheckmanWFED

August 9, 2019 12:50 pm

4 min read

The Postal Service has looked to double-digit growth in its package-delivery volume as a bright spot amid 12 years of net losses. But with USPS reporting its first decline in package volume in nearly a decade, the agency has renewed its call for financial reform from Congress and postal regulators.

The Postal Service on Friday posted a net loss of nearly $2.3 billion for fiscal year’s third quarter, higher than the $1.5 billion loss that the agency reported for the same period last year.

Increased competition in e-commerce package delivery contributed to a decline in last-mile package delivery, which drove an overall decrease in package volume. USPS Chief Financial Officer Joe Corbett said USPS hasn’t experienced this severe of a decline in the last nine years.

“We’ve increased efforts to maintain profitable growth in the package business by driving innovation, and we have a solid strategy to explore opportunities with new customers and to expand our relationships with existing customers,” Postmaster General Megan Brennan said in a call with reporters on Friday.

Those innovations, Brennan said, include developing a “vehicle center of excellence” that takes a big-picture look at the agency’s current vehicle fleet, prototypes of its next-generation delivery vehicles and autonomous vehicle pilots aimed at reducing labor costs.

Brennan said the Postal Service is also looking at advertising opportunities for its Informed Delivery service, which sends scanned images of incoming mail to customers’ email inbox. The service now has 18 million subscribers.

Revenue from shipping and packages still grew by $250 million, or nearly 5% this quarter, despite a volume decrease of 47 million packages, or more than 3% compared to the same period last year.

The agency has seen robust growth in its package volume over the past few years, but Corbett warned last year that new entrants to the package business would eventually make it difficult for the agency to continue to see the same rate of growth.

First-class mail, USPS’ most profitable product, continued its decline, with a $98 million, or 1.6% decrease compared to the same period last year.

Last week, the Senate confirmed three new members of the USPS Board of Governors, giving the board a quorum for the first time in nearly five years. Brennan said agency leadership would swear in the three new governors “in a matter of weeks.”

Those new governors will have an opportunity to finalize recommendations of a draft 10-year business plan the USPS briefed members of the House Oversight and Reform Committee earlier this summer.

Brennan said the committee’s leadership had signaled their intent to introduce postal reform legislation earlier this year.

Brennan cited USPS’ ability to “scale and meet market demands through our unrivaled network” — 90% of customers, she said, live 5 miles from a post office — but the network has also been challenging to maintain amid a decrease in volume.

David Williams, vice chairman of the USPS Board of Governors, said the agency’s management has taken measures to “right-size” the agency amid its declines in volume, despite limitations.

“Volume declines do not necessarily, immediately create the opportunity to reduce work hours and costs,” Corbett said, since the agency’s Universal Service Obligation requires six-day delivery every week to 159 million addresses.

The White House’s postal task force last year recommended that Congress redefine the USO and roll back the postal unions’ collective bargaining on employee compensation. Postal Regulatory Commission Chairman Robert Taub in June called redefining the USO the “single most important thing we can do for the Postal Service.”

Williams said USPS would’ve broken even this quarter if the PRC had kept a two-cent exigent price increase in place.

The PRC put that emergency rate increase in place following the 2008 recession, but removed the price increase in 2016. Postal unions have made repeated calls to bring back the rate hike. In January, USPS increased the price of a first-class postage stamp from 50 to 55 cents — its largest one-time rate increase.

Brennan said the agency will “continue to pursue opportunities to increase revenue and drive greater efficiency within the constraints of our current legislatively imposed business model,” and urged the PRC to conclude its 10-year USPS price-setting review in a way that “better reflects the needs of the organization.”