UPS United Parcel Service

The U.S. Postal Service reported stronger revenue for the latest quarter, driven by continued growth in its shipping and package business, though higher costs contributed to mounting losses.

For the three months ended June 30, USPS said its total revenue increased 7% to $17.72 billion. However, excluding a boost from a change in USPS's accounting estimates for consumer usage of "forever" stamps, the growth was 0.7%.

USPS had been anticipating added pressure on results with the April 10 expiration of an exigent surcharge, which USPS said reduced revenue in the latest quarter by roughly $450 million. The loss of the surcharge is expected to cut an additional $500 million from revenue in the current quarter and reduce USPS's annual revenue by nearly $2 billion.

Overall volume edged down 0.2%, amid continued declines in first-class mail volume, while shipping and package volume increased 14%.

The USPS has been striving to increase its share in an e-commerce market long dominated by United Parcel Service Inc. and FedEx Corp. However, the growth in USPS's shipping volume also has contributed to rising costs, including an increase labor and transportation expenses. During the latest quarter, operating expenses increased 12%

Excluding special items, such as prepaying retiree health benefits and certain changes in workers' compensation expenses, USPS reported a controllable loss of $552 million compared with a year-earlier controllable loss of $197 million.

Over all, USPS reported a loss of $1.57 billion, compared with a year-earlier loss of $586 million.

While the USPS is showing growth in controllable income for the first nine months of its year, which started in October, "the bottom line remains the bottom line, unfortunately," said CFO Joe Corbett on an earnings conference call.

Both the cost of transportation and compensation has risen this year, despite strict cost controls, Mr. Corbett said.

"The majority of the growth in the overall salaries and benefits relates to the growth in the package business, which is much more labor intensive," he said.

Fiscal year-to-date, the shipping and package segment is up nearly 14%, while first class mail—its most profitable segment—declined.

The Postal Service's transportation costs rose in part due to flying more of its packages and letters to meet customer expectations, he added. Plus, letter carriers are now delivering to 1 million more addresses thanks to the agency's universal service obligation.

Still, a rate increase on packages helped boost revenues in that segment, and Postmaster General Megan Brennan didn't rule out raising prices again next year.

"Frankly, where we can take price, we'll take price," she said.

Ms. Brennan praised the fact that Congressional legislation for postal reform has made it out of committee, and urged law makers to take action on it.

The U.S. Postal Service is also close to awarding contracts for its new fleet vehicle prototypes, after which those prototypes will be tested in various terrains before the agency selects a winner.

"We're looking to close that out in a matter of weeks," Ms. Brennan added.

Write to Tess Stynes at tess.stynes@wsj.com and Laura Stevens at laura.stevens@wsj.com

(END) Dow Jones Newswires

August 09, 2016 10:55 ET (14:55 GMT)

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