U.S. Postal Service Revenue Rises on Shipping Growth, but Losses Mount
August 09 2016 - 10:59AM
Dow Jones News
By Tess Stynes and Laura Stevens
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 10:44 ET (14:44 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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