‘Significant’ mail declines, high costs plague Canada Post’s bottom line

Despite record domestic parcel growth, Canada Post cited “significant mail declines and high COVID-19 related costs” as the reasons behind last year’s $779 million before-tax loss.

In last year’s third quarter, the postal service had reported a year-to-date $709 million loss. Now, in its 2020 financial report, Canada Post is reporting a nearly $780 million overall loss for last year – a fivefold increase from 2019’s $153 million loss. Although parcels revenue grew by 25 per cent compared to 2019, direct marketing – once a mainstay of Canada Post’s bottom line – followed a similar trajectory to transaction mail, mostly comprised of letters, bills and statements.

“Costs related to COVID-19 are estimated at $292 million,” according to a statement Canada Post issued on April 30. “A significant portion of this was due to special leaves put in place to support higher-risk employees and those providing child and elder care, as well as increased overtime expenses. The company also incurred additional collection, processing and delivery costs due to increasing parcel volumes.”

On the employee side, Canada Post also had to repurpose its workplaces to maintain physical distancing in facilities “that were never meant to keep people two metres apart,” its statement added.

What the Crown corporation called “significant” one-year revenue declines of $230 million and $257 million for transaction mail and direct marketing, respectively, came as “marketers cancelled or delayed mailings due to COVID-19 and mailers increasingly turned to digital alternatives.” Of the $487 million decline across both of these business lines, $382 million can be attributed to COVID-19, according to Canada Post.

Factoring in parcels revenue, which grew by nearly $700 million last year thanks to several record-setting delivery days, the Crown corporation estimates the net negative impact of COVID-19 is $194 million; however, other factors played into this loss.

“For one, it costs significantly more to process and deliver parcels than it does letters,” reads the recent Canada Post statement.

Last June, an arbitrator’s ruling leading to new collective agreements with the Canadian Union of Postal Workers also resulted in an additional $127 million loss for Canada Post.

RECORD-SETTING PARCELS

With COVID-19 driving unprecedented growth in e-commerce, Canada Post set several records.

On Dec. 21, its carriers set a new record for the most parcels delivered on a single day at 2.4 million – topping the previous record of 1.83 million from 2017 (and before that, 1.52 million in 2016).

Last year, Canada Post also set a new record for the most consecutive days it delivered one million or more parcels. From mid-April through the end of 2020 – 181 consecutive delivery days – the Crown corporation delivered more than a million parcels.

More than $470 million of the $699 million total parcels revenue increase is due to COVID-19, according to Canada Post.

Last year, total parcel volumes grew by 69 million pieces (21 per cent) compared to 2019; however, inbound parcel volumes declined slightly, “in part due to fewer flights from Europe and China during COVID-19.”

TRANSACTION MAIL & DIRECT MARKETING

Ongoing transaction mail revenue and volume declines gained speed in 2020 as people shifted to using digital alternatives – another trend accelerated by COVID-19.

In 2020, transaction mail volumes fell by 286 million pieces (10.5 per cent) and revenue fell by $230 million (8.9 per cent) compared to 2019. Canada Post estimates $146 million of that decline is due to COVID-19, which has continued to push people to digital communication.

Direct marketing mail – long a rival of today’s widely used digital marketing counterpart – also took a hit as people delayed or cancelled marketing campaigns throughout the pandemic. Last year, direct marketing volumes fell by 1.3 billion pieces (27.7 per cent) and revenue declined by $257 million (24.3 per cent) compared to 2019. Canada Post estimates $236 million of that decline is due to COVID-19.

To read the full 2020 annual report, visit bit.ly/3uhXY15.

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