U.S. Postal Service continues streak of losses

Tue Feb 9, 2010 3:24pm EST

* Postal Service reports $297 mln loss in fiscal Q1

* Warns may not meet large payment obligations

* Faces pressure from recession, email

WASHINGTON, Feb 9 (Reuters) - The U.S. Postal Service posted a loss of $297 million for the first quarter of its fiscal year, blaming the recession and the use of electronic mail.

The loss marked a slight improvement over the prior-year period due to cost cutting, but the Postal Service warned the continued negative trend "raises significant uncertainty" about its ability to generate enough cash to meet large payment obligations later this year.

"Unfortunately, economic drivers that significantly affect mail volumes, such as continuing high unemployment levels and lower investments, appear to be lagging general economic recovery," said Joseph Corbett, chief financial officer and executive vice president, in a statement.

The Postal Service, which delivers nearly half of the world's mail, has posted net losses since 2007.

The first quarter of its fiscal year, which ends Dec. 31, is typically the strongest quarter for the Postal Service because of seasonal business and holiday mailings.

The Postal Service said the first-quarter loss was not unexpected, due to unprecedented declines in mail volume that began in 2008 and are related to the recession.

It is also facing head winds from the migration to electronic mail and competition from FedEx (FDX.N) and United Parcel Service (UPS.N).

"This trend is expected to continue," the Postal Service said about the losses.

Further, the Postal Service warned it may not be able to meet obligations to make substantial cash payments in September and October 2010.

The Post Service is due to make payments of about $6.6 billion to prefund retiree health benefits and for its workers' compensation liability.

Last year Congress restructured similar payments, but there is not assurance that similar adjustments will be made this year, the Postal Service said. (Reporting by Karey Wutkowski; Editing by Steve Orlofsky)

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