U.S. Postal Service posts solid shipping, revenue gains in its fiscal second quarter

The U.S. Postal Service reported today a brisk year-over-year gain in its fiscal second-quarter shipping and package volume, but as has been the case for years, it was nowhere near enough to offset the secular decline in USPS' first-class mail traffic.

In the quarter ending March 31, USPS posted an 11.4-percent increase in shipping and package volume, which includes two versions of its deferred-delivery Priority Mail product, first-class mail parcels, and "Priority Select," a popular product where other firms in the parcel supply chain inject shipments deep into the postal network for last-mile deliveries to residences and some businesses. Revenue of $4.3 billion was up 16.2 percent year-over-year, accounting for 24 percent of USPS' total quarterly revenue of $17.7 billion.

Volumes for first-class mail, USPS' largest and most profitable segment, rose a scant 1.9 percent in the quarter. Revenue increased by about 2 percent. First-class mail accounted for 41 percent of USPS' quarterly revenue.

As is widely known, USPS' first-class mail volumes and revenues have been in a long decline as more traditional mail transactions are diverted to digital platforms. By contrast, demand for USPS' package-delivery services has risen due to the surge in e-commerce traffic and the organization's effective positioning as a low-cost delivery option for orders placed by consumers.

However, the decline in first-mail volume and revenue has hurt USPS more than the gains in package traffic have helped. Another factor hurting overall profitability is that the costs of providing package services are much higher than the costs of providing first-class mail services, USPS said.

In 2015, package and shipping volumes would have needed to increase by 260 percent in order to offset the volume declines of first-class mail, USPS said in a filing today with the Securities and Exchange Commission.