USPS – losses grow in Q2

While the impact of the pandemic is set to hit the US Postal Service (USPS) for the remainder of the financial year it hasn’t had any downward pressures on its second quarter (Q2) results.

Total revenue at USPS was $17.8 billion, an increase of $348 million compared to Q2, 2018-19.

Declining mail volumes started to impact revenues in late March where the quarter ended on March 31.

The forecast decline in volumes and revenues are projected to hit the USPS for up to 18 months ahead and given its already precarious financial position this could threaten its ability to provide its universal service obligation.

First Class Mail revenues grew by 1.4% (despite volume decline of 29 million pieces), Marketing Mail fell by 2.5% but parcels revenue grew by $386 million or 7.1% on a volume increase of 0.8%.

Postmaster General and CEO Megan J. Brennan commented: “Although the pandemic did not have significant impact on our financial condition in our second quarter, we anticipate that our business will suffer potentially dire consequences for the remainder of the year, and we are already feeling those impacts during the last half of March. At a time when America needs the Postal Service more than ever, the pandemic is starting to have a significant effect on our business with mail volumes plummeting as a result of the pandemic.

“As Congress and the Administration take steps to support businesses and industries around the country, it is imperative that they also take action to shore up the finances of the Postal Service, and enable us to continue to fulfil our indispensable role during the pandemic, and to play an effective role in the nation’s economic recovery.”

Brennan added, “We are grateful for the heroism and commitment of our 630,000 postal employees who continue to serve the American public during this pandemic, and we look forward to working with policymakers on ensuring the solvency of the Postal Service.”

Expenses as ever outweighed revenues. Operating expenses grew by 14.2% to $22.3 billion. This led to a net loss of $4.5 billion in the quarter. As indicated in a previous article at Apex Insight, this could lead to a problem of absolute cash flow and the ability to operate.

“We are unable to predict the duration of COVID-19 business closures and the duration of the recession we are currently experiencing; however, this situation will materially damage our financial condition,” said Chief Financial Officer Joseph Corbett. “While we continue to conserve capital and reduce expenses in areas where volumes are declining, our ability to continue to serve the nation will require substantial funding from the federal government or other sources.”