Canada Post at ‘critical juncture’ due to unsustainable finances: board chair

The chair of Canada Post’s board issued a stark warning on Wednesday, describing the organization's financial condition as "unsustainable" as it struggles to compete with e-commerce platforms and faces declining demand.

"Canada Post is at a critical juncture," said board chair André Hudon during 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."

Hudon’s concerns, echoed by other top executives, follow years of difficulties for the national mail carrier. Experts have cautioned that Canada Post could face a fate similar to that of Blockbuster if it fails to adapt quickly.

Hudon pointed out that the surge in online shopping during the COVID-19 pandemic has transformed the parcel delivery market, putting Canada Post up against "high-tech, low-cost operators who are rapidly and relentlessly evolving." This shift has had a "huge" impact on the company’s finances.

"With every quarterly report, it becomes clearer that our financial situation is unsustainable," Hudon stated.

In response to these challenges, Hudon noted that Canada Post has taken measures such as pausing certain investments to focus on core priorities and cutting costs across the organization.

The Crown corporation's latest annual report reflects similar concerns, citing "significant" annual losses since 2018. Last year’s loss of $748 million was the second-largest on record.

Hudon mentioned that Canada Post has been striving to introduce new services to remain competitive in the parcel delivery market, which is expected to double over the next decade.

The company has also faced a steep decline in letter mail deliveries, once its primary revenue stream. Over the past two decades, Canada Post’s annual letter deliveries have dropped from 5.5 billion to about two billion, according to president and CEO Doug Ettinger.

More than a decade ago, Canada Post shifted its focus to meet the growing demand for parcel delivery, Ettinger explained. However, the company has seen its share of the parcel delivery market 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," Ettinger said, noting that Canada Post is the only major competitor in the market that doesn’t offer weekend delivery.

To remain competitive, Ettinger emphasized that Canada Post requires greater flexibility in its operations, investments, and regulatory environment.

In August, Canada Post reported a second-quarter profit of $46 million before tax, largely due to a one-time sale of subsidiaries, which offset an operational loss of $269 million. This compared to a loss of $76 million before tax in the first quarter of the year.

Earlier this year, Canada Post and Purolator Holdings Inc. completed the sale of their shares in subsidiaries Sci Group Inc. and Innovapost Inc., announced in January.

The 2023 annual report also highlighted that Canada Post has been operating without a government-approved corporate plan since 2020, with previous assumptions and projections now outdated. The company is still awaiting approval of a new corporate plan, which would guide it through 2028 and "emphasize the need to work with our shareholder to achieve financial self-sustainability."