USPS Reports Another Staggering Loss in FY11...But It Might've Been Worse
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Is it about time for the changing of the guards when it comes to mail delivery?
The United States Postal Service (USPS) has been notoriously bleeding money over the past several years as U.S. citizens have become more comfortable receiving important notices via electronic means, whether it be email, text message, or logging on to an Internet address to pay bills.
And let's be honest, about 85 to 90 percent of what comes in the mail is either junk or bills.
To be sure, traditional mail is still important; many don't have access to new technology or haven't considered adapting yet. Those folks will still see benefit from door-to-door mail service.
For it's fiscal year ended September 30th, 2011, the USPS reported a net loss of $5.1 billion, according to new data Tuesday. Notably, the USPS said the net loss would have more than doubled -- to $10.6 billion -- had it not been for passage of legislation that postponed a congressionally mandated payment of $5.5 billion to pre-fund retiree health benefits.
But it isn't just pensions bleeding the system dry, demand is also down. The USPS reports that volumes have also declined 1.7 percent to 3 billion pieces in 2011. According to the release, "The Postal Service's largest and most profitable product, First-Class Mail, continued its year-over-year decline, from $34.2 billion in 2010 to $32.2 billion in 2011 (5.8 percent), which dwarfed continued growth in its more competitive products, packages and Standard Mail."
Operating revenue fell 2.1 percent to $65.7 billion, though operating expenses fell 6.4 percent to $70.6 billion.
Finally, the USPS provided this ominous statistic: "Since 2001, the Postal Service has reduced work hours by 28 percent, while delivering to almost 14 million additional addresses." Well, how many total addresses are there? About 150 million, according to USPS data, meaning that delivery points have a CAGR of less than one percent over the last 10 years.
The argument for privatization of the mail service has also been going on for a while. Is it as simple as shifting providers? No, there's pensions and livelihoods to deal with, and the elimination of the USPS will put another undue burden on the government. However, investors in United Parcel (NYSE: UPS) and FedEx (NYSE: FDX), not to mention Stamps.com (Nasdaq: STMP), may want to start watching what happens more closely as costs continue to outweigh profit for the mail system.
The United States Postal Service (USPS) has been notoriously bleeding money over the past several years as U.S. citizens have become more comfortable receiving important notices via electronic means, whether it be email, text message, or logging on to an Internet address to pay bills.
And let's be honest, about 85 to 90 percent of what comes in the mail is either junk or bills.
To be sure, traditional mail is still important; many don't have access to new technology or haven't considered adapting yet. Those folks will still see benefit from door-to-door mail service.
For it's fiscal year ended September 30th, 2011, the USPS reported a net loss of $5.1 billion, according to new data Tuesday. Notably, the USPS said the net loss would have more than doubled -- to $10.6 billion -- had it not been for passage of legislation that postponed a congressionally mandated payment of $5.5 billion to pre-fund retiree health benefits.
But it isn't just pensions bleeding the system dry, demand is also down. The USPS reports that volumes have also declined 1.7 percent to 3 billion pieces in 2011. According to the release, "The Postal Service's largest and most profitable product, First-Class Mail, continued its year-over-year decline, from $34.2 billion in 2010 to $32.2 billion in 2011 (5.8 percent), which dwarfed continued growth in its more competitive products, packages and Standard Mail."
Operating revenue fell 2.1 percent to $65.7 billion, though operating expenses fell 6.4 percent to $70.6 billion.
Finally, the USPS provided this ominous statistic: "Since 2001, the Postal Service has reduced work hours by 28 percent, while delivering to almost 14 million additional addresses." Well, how many total addresses are there? About 150 million, according to USPS data, meaning that delivery points have a CAGR of less than one percent over the last 10 years.
The argument for privatization of the mail service has also been going on for a while. Is it as simple as shifting providers? No, there's pensions and livelihoods to deal with, and the elimination of the USPS will put another undue burden on the government. However, investors in United Parcel (NYSE: UPS) and FedEx (NYSE: FDX), not to mention Stamps.com (Nasdaq: STMP), may want to start watching what happens more closely as costs continue to outweigh profit for the mail system.
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