The U.S. Postal Service today reported its financial results for third quarter of its fiscal year 2020, (April 1, 2020 – June 30, 2020), as the COVID-19 pandemic continues to have an unpredictable impact on the economy and the Postal Service.
Quarantines, stay-at-home orders, and travel and logistics restrictions in connection with the outbreak have affected retail and commercial customers, as well as suppliers and mail service providers. The Postal Service relies on the sale of postal products and services to fund its operations and is significantly impacted by factors including, but not limited to, overall customer demand, the mix of postal services and contribution associated with those services, and the volume of mail and packages processed through its network.
As a result of the pandemic, and to a lesser extent, secular mail declines, the Postal Service’s sales from mail services, its largest sales category, continued to significantly decline during the third quarter. Meanwhile, the Postal Service’s sales from Shipping and Packages experienced substantial growth as a result of the surge in e-commerce driven by the COVID-19 pandemic, and we expect this surge to abate as the economy opens. However, the package volume increases drove substantial increases in workhour and operating expenses.
The ability to borrow an additional $10 billion under the CARES Act addresses the Postal Service’s near-term liquidity crisis but does not address the Postal Service’s broken business model. It merely postpones the impending liquidity crisis and the borrowings must be repaid in a period where cash shortages are forecasted.
In addition to increased labor costs to support this volume increase, transportation expenses were impacted as logistics restrictions and limitations associated with the pandemic led to fewer modes of available transportation, especially air transportation. Furthermore, the pandemic significantly increased the Postal Service’s expenses for supplies and services, such as personal protective equipment (PPE), and also increased paid sick leave, including new leave authorized by the Families First Coronavirus Response Act, enacted as Public Law 116-127 (FFCRA). The FFCRA provides the means for companies and other government entities to receive federal reimbursement for payment of this FFCRA leave, however, the Postal Service is not eligible for such reimbursement.
The Postal Service reported total revenue of $17.6 billion for the third quarter of fiscal 2020, an increase of $547 million, or 3.2 percent, compared to the same period last year.
Compared to the same quarter last year, Marketing Mail revenue declined by $1.4 billion, or 37.2 percent, on a volume decline of 6.4 billion pieces, or 36.4 percent. First-Class Mail revenue decreased by $373 million, or 6.4 percent, on a volume decline of 1.1 billion pieces, or 8.4 percent. Secular declines in mail have continued to negatively affect mail revenue and volume, and those declines have been significantly exacerbated by the effects of the COVID-19 pandemic.