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5 Companies Affected by Changes at USPS

Thursday - 2/7/2013, 10:42am  ET

In a move seen as necessary to save it from financial ruin, the United States Postal Service has announced plans for a five-day delivery work week. The move is one that will hopefully keep the USPS from further defaulting on loans to the US government. Postmaster General Patrick R. Donahue said, “The Postal Service has a responsibility to take the steps necessary to return to long-term financial stability and ensure the continued affordability of the U.S. Mail."

No Saturday delivery will be limited to first class and regular mail, as packages will still be delivered. Concerning the six-day work week for package delivery, Donahue said, “Our customers see strong value in the national delivery platform we provide and maintaining a six-day delivery schedule for packages is an important part of that platform.”

The new schedule, which begins in August, will save the company $2 billion annually. By saving 45 million work hours, the USPS will work on cutting down its fiscal problems. Last year, the Postal Service lost $15.9 billion, losing over $25 million a day. Since 2006, the company has cut 168,000 jobs, trimming its workforce by over 24%.

The Postal Service is not publicly traded, so you can’t profit from its misery or pending recovery. However, several companies could have positive and negative reactions based on today’s news. Here is a look at those most affected by the announcement.

FedEx

FedEx is the largest express shipping company in the world. In 2012, the company posted a revenue increase of 9%, and earnings per share increase of 40%. The company’s ground service saw growth of 12% and express saw growth of 6%. Both of these segments compete with the USPS. The non-delivery of mail on Saturdays does not include packages, so the USPS will still compete directly with FedEx. However, with fewer branches open on Saturday, FedEx should see increased demand at its shipping locations around the country. Customers will likely misinterpret the no mail delivery on Saturdays to include packages, which could be to FedEx’s benefit. Revenue is expected to rise 4% in 2013 and 6% in 2014.

UPS  

UPS is the largest package delivery company in the world, both by volume and revenue. The company has seen a huge increase in its United States business segment. Package volume continues to increase, as the company is utilized for more online retailers. Similar to FedEx, UPS will gain customers from USPS for its continuing focus on customers six days a week. Revenue is expected to rise 5% in 2013 and 6% in 2014.

In December, UPS was the most visited postage site in the country, with over 21.2 million visitors. This was a huge lead over the USPS (16.1 million), FedEx (15.7 million), and Stamps.com (1.5 million). UPS is becoming the brand most trusted during the holiday season for customers and businesses. Expect UPS to pick up additional customers that don’t trust or understand the USPS and their schedule.

Netflix  

Netflix has shifted to a digital-based company. In the fourth quarter, the company counted 27.1 million customers that used its streaming services, an increase of 2 million. DVD by mail subscribers totaled 8.2 million, a decrease of 382,000. Some subscribers were counted in both of these figures, but the shift is eminent. The company forecast for the number of DVD subscribers to fall to 7.6 million in the next quarter, while streaming customers are expecting to increase to 28.5 million.

Investors seemed to like the news of USPS not delivering the red envelopes on Saturday. Shares of Netflix saw a nice bounce as a result of cheaper postage costs. Not having new movies two days in a row could also lead to more subscribers adding the streaming option for $7.99 a month, meaning subscription numbers could trend higher in August through the end of the year.

The company tried to spin-off its DVD segment. Anyone remember Qwikster? Customers were mad about changes at that time and could be ready to voice their opinion now. While Netflix shares rise due to lower postage costs for the company, could customers expect those savings to be passed on to the monthly subscription prices? An unlimited DVD plan will now allow you to watch DVDs anytime, but only receive new ones five days a week. It seems a little unfair to use the word “unlimited.”

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