USPS Reports Q2 Net Loss of $1.5B but 14.4% Gain in Parcel Volume

USPS, FedEx, UPS, shipping/delivery, operations and fulfillment, United States Postal ServiceThe U.S. Postal Service reported operating revenue of $16.95 billion for the second quarter ended March 31, up $223 million or 1.3% from $16.72 billion in the same period last year. The net loss was $1.5 billion, down from $1.9 billion in 2014. Excluding mandated prefunding of retiree benefits, the net loss would have been $44 million, down from $447 million the prior year.

According to a USPS release, the gain in operating revenue was due largely to a 14.4% increase in shipping and parcel volume in Q2, nearly double the 7.3% bump in 2014.

“We’re pleased with the increase in our controllable net income compared to the same period last year, which demonstrates that our cost containment and revenue strategies are delivering results,” said Postmaster General and CEO Megan Brennan in a release. “We also took significant steps during the quarter to improve our long-term operating model, which will help drive greater long-term efficiencies throughout our network.”

While shipping and package volume and revenue grew, volume and revenue from other products were down. First-Class Mail and Standard Mail volumes declined 2.1% and 1.1%, respectively, during Q2 compared to last year.

“Shipping and package services are a key business driver, however, operating margins in this business are lower than in mailing services,” said USPS CFO and Executive Vice President Joseph Corbett. “While we’re pleased to see a small increase in controllable income, to improve our margins, we’ll need to make investments in our network infrastructure and delivery vehicles.”

The USPS is looking to replace its 25-year-old fleet with 180,000 new vehicles for an estimated $4.5 billion-$6.3 billion, as it seeks to cut emissions in half and make its vehicles better able to address an increasingly parcel-focused future. Interested parties include Ford, Fiat Chrysler, Nissan, Humvee manufacturer AM General and truck maker Freightliner, as well as electric vehicle manufacturers. One interesting vendor is Workhorse Group, which is proposing a combination of electric/hybrid vehicles and drones for the couriers to swiftly complete their appointed rounds.

Shipping and logistics consultant Jerry Hempstead said the boost in USPS parcel volume was largely due to shippers feeding them more business as a result of rising prices from the major carriers (dimensional, accessorial, fuel surcharges, annual rate increase). By comparison, UPS reported its daily package volume rose 2.4% in Q1 ended March 31, while FedEx’ ground volume went up 7% in Q3, ended Feb. 28. Hempstead added the USPS figure of 14.4% growth was partly due to the fact that it handles a significant number of last-mile deliveries for UPS, FedEx and DHL.

“As shippers of smaller parcels, especially on ecommerce orders, are most affected by the DIM rule change, shipments that weren’t under scrutiny before are suddenly being price shopped,” Hempstead said. “And that pace will pick up as the year progresses, when companies look at their Q1 numbers and their P&Ls and wonder why their shipping costs are out of sync with what was budgeted. The USPS has become very competitive in light-weight parcels.”

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