USPS Loses $297 Million on Holiday Mail Decline

The U.S. Postal Service lost $297 million in its first fiscal quarter, ended Dec. 31, reflecting the effects of the recent recession and increasing migration of mail to electronic alternatives.

“Unfortunately, economic drivers that significantly affect mail volumes, such as continuing high unemployment levels and lower investments, appear to be lagging general economic recovery and last quarter’s growth in GDP (gross domestic product),” said Joseph Corbett, chief financial officer and executive vice president. “This situation, coupled with the growth in electronic alternatives to mail, creates a very challenging environment.”

Some economic indicators point to the beginning of a slow recovery, but downward pressure on mail volumes is expected to continue throughout 2010. “Our volume for 2010 is projected to be approximately 167 billion pieces, a decline of approximately 10 billion pieces from last year’s total,” Corbett said.

In what is usually the strongest quarter for the Postal Service because of seasonal and holiday mailings, revenue declined 3.9 percent and expenses fell 4.4 percent compared with the prior year first quarter. But the loss was an improvement on the $384 million deficit for the period ending Dec. 31, 2008.

First-quarter mail volume was 45.7 billion pieces, compared to 50.2 billion in the same period last year, or 8.9 percent below 2009. Total operating revenue for the quarter was $18.4 billion, compared to $19.1 billion in the first quarter of 2009.

USPS cost cutting efforts included reducing work hours for the first quarter by more than 28 million. Work-hour reductions are achieved through continued efficiency improvements and matching workloads to lower mail volumes.

“With net losses reported for 2007, 2008 and 2009, the continued negative trend in fiscal 2010 raises significant uncertainty about the Postal Service's ability to generate sufficient cash flows to fund large cash payment obligations in September and October 2010,” the Postal Service said in a statement.

Contact Thomas L. Gallagher at tgallagher@joc.com.