For the first time in quite a while, the Postal Service has reported a net profit in its latest quarterly earnings report. With the organization’s major financial struggles, this is a significant turnaround. However, the good news came with some bad news.
The Postal Service said in its latest earnings report that it posted net income of $318 million in the first quarter of fiscal year 2021 (Oct. 1, 2020 – Dec. 31, 2020) on total revenue of $21.5 billion. However, it immediately follows that news with this statement: “Excluding non-cash workers’ compensation adjustments and a time-limited peak surcharge, the loss for the quarter would have been approximately $650 million.”
Apparently it still counts as a profit though despite the caveat. Postmaster General Louis DeJoy said in a statement, “Our strong growth in package volume during the holiday quarter shows how dramatically our business and revenue mix is shifting. 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.”
In other words, the Postal Service had a great quarter but you probably shouldn’t get used to seeing profits on a regular basis just yet.
There certainly were some bright spots in the report. The strong package growth DeJoy referenced was evident in that division’s figures. The Postal Service’s sales from Shipping and Packages increased by 42.1% ($2.8 billion) on a volume increase of 435 million pieces, or 25.0% over the same quarter last year as more Americans are staying at home and shopping online during the ongoing pandemic.
According to the Postal Service, there is some bad news associated with that growth, however. Along with the boom in shipping packages comes higher costs for labor and operations. Transportation expenses were 8.5% higher than the previous year. Compensation and benefits expenses increased by $771 million (6.2%) over the same time period last year. A GAO report issued last year echoed this problem and showed that employment related costs are a huge burden on the agency.
More bad news that has come along with the shipping growth has been evident in the numerous reports of delays in getting mail delivered as the Postal Service struggles to keep up with demand.
Adding to the growth cost burden is the Families First Coronavirus Act – it authorizes companies to get reimbursed by the government for leave payments due to COVID-19 made under the law, but the Postal Service said it is not eligible for the reimbursements.
Traditional mail service sales continued to slide. Marketing Mail revenue was down by $246 million (5.6%) on a volume decline of 788 million pieces (3.9%) over last year. First-Class Mail revenue decreased by $177 million (2.7%) on a volume decline of 594 million pieces (4.1%).
The Postal Service has continually made pleas to Congress for money and legislation to solve some of its financial problems. A bill was recently reintroduced to eliminate the pre-funding mandate for Postal Service retiree health benefits, something that gets much of the blame for the agency’s financial problems. Whether or not the bill will fare any better under the new Congress remains to be seen.