The chair of Canada Post’s board warned Wednesday the organization’s financial situation is “unsustainable” as it struggles to compete against e-commerce platforms and faces dropping demand.
“The board and senior management recognize that Canada Post is at a critical juncture,” said André Hudon at the company‘s annual general meeting.
“Significant change is urgently needed to preserve Canada Post’s delivery network, which is vital because it’s the only delivery network built to serve all Canadians.”
The grim warnings from Hudon and other top executives come after years of trouble at the national mail carrier, which experts say could “go the route of Blockbuster” if it doesn’t change course soon.
Hudon said the surge in online shopping during the COVID-19 pandemic reshaped the parcel delivery market, and Canada Post is competing with “high-tech, low-cost operators who are rapidly and relentlessly evolving.”
The impact on the company’s finances have been “enormous,” he added.
“With every quarterly report, it becomes clearer that our financial situation is unsustainable,” Hudon said.
He said the organization has taken some steps to try and address these challenges, including pausing some investments to concentrate on core priorities and reducing costs at all levels.
The Crown corporation’s latest annual report used similar language, noting it has recorded “significant” annual losses since 2018. Last year’s loss was the second-largest on record, at $748 million.
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Hudon said the company has been working hard to deliver new services to help make Canada Post more competitive in parcel delivery as the e-commerce market is projected to double in the next decade.
The company has also struggled with a significant reduction of letter mail deliveries, which used to be its primary source of revenue.
Over the past two decades, the organization has gone from delivering 5.5 billion letters a year to about two billion, president and CEO Doug Ettinger said Wednesday.
More than a decade ago, Canada Post shifted its focus to address growing demand for parcel delivery, Ettinger told the meeting. However, he said the company has seen its parcel delivery market share cut in half since 2019.
“We are doing our very best to compete in this fast-paced parcel delivery market, but we’re doing so with an operating and delivery model built for an older era,” he said.
It doesn’t help that Canada Post is the only competitor in the category that doesn’t offer weekend delivery, he said.
In order to compete, Ettinger said Canada Post needs more flexibility in its operations and its investments, as well as from a regulatory standpoint.
In August, Canada Post reported a second-quarter profit of $46 million before tax as a one-time sale of subsidiaries helped offset an operational loss of $269 million.
That’s compared with a loss of $76 million before tax in the first quarter of the year.
In January, Canada Post and Purolator Holdings Inc. announced they were divesting their shares in subsidiaries Sci Group Inc. and Innovapost Inc. The transactions closed earlier this year.
The 2023 annual report also noted Canada Post has been operating without a government-approved corporate plan since 2020, “which included now-outdated assumptions and projections.”
The company said it is still awaiting approval on a new corporate plan that would carry it to 2028, which “emphasized a need to work with our shareholder to achieve financial self-sustainability.”
—With files from the Canadian Press
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