Canada’s national postal service has reported a $66-million loss before taxes in its fiscal first quarter, pointing to many of the same factors that drove the U.S. Postal Service to declare its own deficit earlier this month.
Canada Post said its financial result for the quarter ending March 28 was $89 million worse than the same period a year earlier, saying continued growth in parcels revenue and volumes was not enough to offset increased costs, while ongoing declines in Transaction Mail and Direct Marketing also contributed to the loss. The loss came on revenue of nearly $1.7 billion in the first quarter, an increase of $7 million or 2.1% compared to the first quarter of 2019.
The result came as Covid-19 disruptions began to impact Canada Post’s financial performance in mid-March. With many Canadians isolating at home and shopping more online, the service says it has been processing and delivering parcels at levels only experienced during the busiest weeks of the Christmas season.
However, processing and delivering parcels is more expensive than letters, as parcels require more technology, processing space, and time interacting with customers, Canada Post said. Thus, the increase in costs was mainly due to higher labor and employee benefits, as well as increased collection, processing, and delivery costs from Parcels growth.
Those circumstances were similar to the business conditions described by the USPS, which collected a slight increase in revenue for the period between January 1 and March 31, adding $348 million compared to its 2019 performance to reach $17.8 billion. But the extra cash was not enough to offset the USPS’ core problems—like its large pension obligations and a “secular decline in mail” caused by a digital society. So the postal service reported a net loss of $4.5 billion for its fiscal second quarter, more than double its loss in the same period last year.
Future results will likely not improve quickly for Canada Post, which said the pandemic is expected to have a larger impact on the business in its fiscal second quarter, as parcel volumes rapidly increase and Transaction Mail and Direct Marketing volumes quickly decrease.