The U.S. Postal Service (USPS) plans to enact a “comprehensive restructuring and financial plan” following its latest quarterly earnings report that showed a rare sight on the struggling agency’s accounting books, a profit of $318 million for the period including the holiday peak shipping season.
However, that profit would have been a loss of $650 million for the three-month period ending Dec. 31, if the numbers excluded non-cash workers' compensation adjustments and a time-limited peak surcharge, USPS noted.
In comparision, the agency posted a net loss last year of $9.2 billion, about $363 million more than it lost in 2019. Two main factors in those results were the impact of the coronavirus pandemic and criticism of policies enacted by new Postmaster General Louis DeJoy. The former XPO Logistics Inc. executive had instituted cost-cutting measures that slowed the delivery of many letters and parcels, but DeJoy has argued that the service actually performed well in light of the impact of a swell in mail-in voting during the Presidential election in November.
“Throughout the peak season, the Postal Service, along with the broader shipping sector, faced pressure on service performance across categories as it managed through a record of volume while also overcoming employee shortages due to the ongoing surge in Covid-19 cases, as well as ongoing capacity challenges with airlift and trucking for moving historic volumes of mail,” USPS said in the report. “The Postal Service uniquely accepted all incoming packages, further straining its system. To recover and stabilize operations, the Postmaster General and the Executive Leadership Team took steps to help address the issues. While some delays remain, service levels have substantially improved and remain a top priority.”
Other major parcel carriers led by UPS Inc. and FedEx Corp. had capped the number of packages they would accept from shippers, pointing to tight transportation capacity in their sortation networks and the sector at large but USPS continued to accept all items.
Those trends have accelerated USPS’ long-term trend toward a broad shift in its revenue sources from letters to packages. In the most recent quarter, USPS said its sales from mail services, its largest sales category, continued to decline. Marketing Mail revenue declined by $246 million, or 5.6%, on a volume decline of 788 million pieces, or 3.9 %. First-Class Mail revenue decreased by $177 million, or 2.7%, on a volume decline of 594 million pieces, or 4.1%, compared to the same quarter last year.
Meanwhile, the service’s parcel business was booming. USPS recorded that sales from Shipping and Packages increased by approximately $2.8 billion, or 42.1%, on a volume increase of 435 million pieces, or 25.0%. That change was triggered by an evolution of consumer behavior during the pandemic as the nation increasingly relied on the safety and convenience of e-commerce, USPS said.
“Our strong growth in package volume during the holiday quarter shows how dramatically our business and revenue mix is shifting,” DeJoy said in a release. “While our positive financial results this quarter are certainly welcome, we continue to face systemic imbalances that make our current operating model unsustainable, and the economic impacts of the COVID-19 pandemic will continue to challenge the organization. It is essential that the Postal Service adopts comprehensive reforms so that we are able to meet the changing needs of our business and residential customers, and ensure our ability to provide reliable, universal mail and package delivery for all Americans."