Shares of Stamps.com Plummet 50 Percent On News of Plans to End Exclusivity with USPS

Shares at Stamps.com Inc took a big dive in late trading on Thursday after the company predicted large performance declines through the rest of this year.  After posting its 2018 Q4 earnings report, on Thursday, the company said it needs to work with multiple parcel/mail carriers—like Amazon.com, FedEx Corp, and United Parcel Service Inc—instead of exclusively with the United States Postal Service. The reason they want to seek out other relationships is that customers now have expediency expectations that the basic post office is not capable of accomplishing. 

Stamps.com chairman and CEO Kenneth Thomas McBride puts it quite simply, in a conference call with analysts: “We will no longer be exclusive to the USPS and that’s non-negotiable.”

Indeed, the company now expects that 2019 earnings will likely be half that of 2018 if something does not change.  

McBride goes on to elaborate, “Our customers can no longer survive on just the USPS, and we don’t see that as a viable option for the next five years. So basically that was our premise, is like, no matter what, this company can no longer be exclusive given the trends in the shipping market.”

He also explains that Stamps.com is trying to anticipate serving the best interest of the customer.  Customers have come to expect things like 2-day shipping, thanks in large part to Amazon Prime’s membership options.  And since the traditional post office cannot typically offer this guarantee, customers will look for options that can provide it; and if Stamps.com remains exclusive with the post office, they will also get left behind. 

Indeed, McBride explains, “Amazon’s track record of disrupting an industry is well established. So their threat should be taken very seriously by every player in the shipping industry. We are setting our corporate strategy assuming Amazon will be a big global player in shipping.”

But while the principle may be sound, it could cost them. USPS projects that earnings for this year should improve between $5.15 and $6.15 per share on revenue between $540 million and $570 million.  Earlier, analysts had called for earnings of $10.79 per share on $689 million in revenue.

And on that note, shares of Stamps.com Inc plunged more than 53 percent, to $92.80 Friday morning.  

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