USPS posts double-digit gains in shipping, package revenue in FY '16; mail declines

The U.S. Postal Service today reported a 15.8-percent increase in its shipping and packages business in its 2016 fiscal year that ended Sept. 30, continuing a secular trend of strong package growth in the face of declines in USPS' core first-class mail business.

In the fiscal year, the shipping and packages unit—which includes the one- to three-day delivery service known as "Priority Mail" as well as "Parcel Select," where packages are turned over to USPS for final-mile deliveries to residences and businesses—reported income of $17.3 billion, up from 14.9 billion in 2015. Volume rose to 5.1 billion pieces from 4.5 billion. Shipping and packages accounted for one-fourth of USPS total revenue of nearly $70.4 million.

First-class mail, which is also USPS' most profitable product, posted a revenue drop of 3.3 percent, to $27.3 billion.

In all, USPS reported a net loss of $5.6 billion, compared to a $5.1 billion net deficit in 2015. USPS spent $5.8 billion in its 2016 fiscal year to prefund retiree health benefits, which is required by law. Excluding that obligation, USPS said it would have reported $200 million in net income.

"The Postal Service continues to win e-commerce customers and grow our package-delivery business," said Postmaster General Megan J. Brennan in a statement.

Operating expenses increased in 2016 on various fronts, among them a $413 million rise in transportation costs due to the increase in package volumes, which are more labor-intensive to process and require more transportation capacity than mail.

As it has done numerous times in recent years, USPS warned that the positive trends in some its businesses should not mask the need for comprehensive reform to stem multi-billion dollar losses that, absent any changes, are likely to continue. USPS said its retiree health obligations are "unaffordable," and that it is burdened by an "ineffective" mechanism to price its products.