US Postal Service gets whacked with a $1.3 billion loss as it struggles to keep up with Amazon

• The US Postal Service reported a total net loss of $1.3 billion in the second quarter. It lost $562 million a year ago.
• The USPS posted a controllable loss of $656 million in the second quarter, compared with income of $12 million for the same period a year ago. This is an important number because it factors in expenses such as wage increases.
• The losses are surprising when you consider package volume increased 5%.
• The USPS largely attributed its downward profitability shift to increased compensation costs, suggesting that the company is scrambling to keep up with competition at the peril of its bottom line.

The US Postal Service is headed in the wrong direction.

It posted a controllable loss of $656 million in the second quarter, compared with income of $12 million for the same period a year ago. The USPS also incurred a total net loss of $1.3 billion, compared to the $562 million loss it saw in the second quarter of 2017. Those drastic slips are likely to overshadow USPS’s revenue rising 1.4%, to $1.75 billion, on a year-over-year basis.

Perhaps even more troublesome is that the USPS posted such a large loss during a period in which package volumes increased by 5%.

While that uptick most likely explains the $364 million increase in compensation expenses due to what it describes as “additional hours incurred to support the labor-intensive package business as well as contractual wage adjustments,” it also raises the question of why the volume surge wasn’t able to bridge the controllable-income gap.

One possible explanation for the wage jump is that the USPS is doing everything in its power to compete with Amazon — including offering workers more hours — at the expense of profitability.