US Postal Service gets whacked with a $656 million loss as it struggles to keep up with Amazon

Reuters

Betty Terry walks past a post office which closed its counter services four years ago at the Veterans Administration in Los Angeles, California January 30, 2012.

• The US Postal Service posted a controllable loss of $656 million in the second quarter, compared to income of $12 million for the same period a year ago.
• The loss is surprising when you consider package volume increased 5%.
• The USPS largely attributed its profitability shift to increased compensation costs, suggesting that the company is scrambling to keep up with competition at the peril of its own 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 to income of $12 million for the same period a year ago. That drastic slip is likely to overshadow USPS revenue rising 1.4% to $1.75 billion on a year-over-year basis.

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

While that uptick 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 profitability gap.

One possible explanation is that the USPS is doing everything in its power to compete with Amazon - including offering workers more hours - and it's just not working.

This development is sure to catch the eye of President Donald Trump, who went on a tweetstorm last month in which he attacked Amazon for what it's doing to the USPS. In the past, Trump has mentioned changing the company's tax treatment or going after it on antitrust grounds.

Amazon's stock climbed 0.2% in pre-market trading, and is up 38% in 2018.