Mail Does Matter and the USPS Just Turned its First Profit in Years
by Joe Freeman
April 20, 2016
The United States Postal Services released its fiscal year 2016 first quarter report and the news is long overdue. The USPS generated enough revenue and controlled enough cost to produce its first profitable quarter in recent memory. Postmaster General (PMG) and Chief Executive Officer Megan J. Brennan noted that the increase included holiday shipping. However, revenue from package shipments grew 13.5% over the previous year. Another contributing factor was the additional revenue from the Exigent Rate Increase (ERI) that will expire in April of this year. As you may remember the ERI was an approved measure to assist the Postal Service while it restructured the national mail delivery system. The measures taken by the USPS have brought it back from multi-billion dollar deficits reported for many years.
This is certainly good news but the USPS faces a loss of revenue when the emergency rates are rolled back. Keep in mind that the USPS is due an annual rate increase request that is based on the consumer price index. Unfortunately, the USPS will not receive that increase this year to offset the roll back. That could result in a loss of three cents per stamp. When you consider the volume of items still moving via U.S. mail, this situation could take a bite out of the USPS’ recent fiscal success.
Here is to hoping that a negotiated plan can be reached this year where portions of the roll back can be considered a conditional operations “bonus” should the USPS continue to act prudently with its spending controls and improved revenue stream from package shipments. It’s a good sign that the USPS is evidently correcting past mistakes in adjusting to the customers’ future needs. Looking ahead, I suggest we review the next two quarters not from a profitability stance, but from the perspective of increased volume and revenue, year over year. It’s not possible to fix everything overnight. I know that I will be watching to see if we have a “one hit wonder” with the profitable first quarter or if PMG Brennan has succeeded in helping the USPS turn the corner.
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