Revenues and net losses were down in the third quarter of the financial year at the US Postal Service. Management are working hard to drive efficiencies into the operation through the Delivering for America strategic plan. So far the chief drop in losses comes from the recent Postal Reform Act as opposed to a genuine turnaround in financial standing.
Overall revenues dropped 0.6% compared to Q3, 2022 to $18,625m. The Postal Reform Act was responsible for a considerable drop in net losses from $59.7bn in Q3, 2022 to just $1.7bn in this financial quarter.
Postmaster General Louis DeJoy said that the management of the US Postal Service is focusing hard on driving efficiencies into the postal operator. He said, “Our team is working hard to reduce our cost of performance which is helping to off-set still sizeable inflationary and economic pressures. We are setting the stage for long-term financial sustainability as we continue to modernise our processing, transportation, retail and delivery networks.”
Amongst highlights of the operational side of the US Postal Service, its Parcel Services segment saw volumes increase by 5.4%. This is a segment aimed at large organisations that pre-sort their items prior to entry into the USPS system, and as such generates the lowest return of all of its revenue streams.
The First Class Packages revenue stream is one of the most exposed to the vagaries of the market. Being the service primarily used for covid-19 test kits, this saw volume drops of 13.4% y-o-y. Priority Mail Services volumes also dropped, by 6.6%, “Due to continued abatement of the pandemic related surge in e-commerce,” according to a statement from USPS.
USPS continued, “We believe the pandemic has had a lasting impact on our Shipping and Packages category as consumer behaviour has evolved from the safety and convenience of e-commerce.” It added that while consumer demand remains strong, “Volumes have experienced recent fluctuations but are not expected to return to pre-pandemic levels.”
Due to an ageing and inefficient network, the postal service didn’t see the pandemic boom in volumes translate into lower losses let alone profitability. The Delivering for America strategic plan involves investing heavily in the USPS delivery fleet and processing operations. As such, this will involve relatively high costs in the short to medium term to achieve efficiencies in the medium to long term. This will not be realised any time soon.
Author: Richard Shrubb