Royal Mail UK parcel volumes drop, outlook uncertain as COVID-19 restrictions relax
The Royal Mail logo is seen outside the Mount Pleasant Sorting Office as a delivery vehicle arrives, in London, Britain on June 25, 2020. REUTERS / John Sibley
July 21 (Reuters) – Royal Mail Plc (RMG.L) said Britons were receiving fewer packages delivered to their homes as pandemic restrictions were lifted and it had refrained from offering an annual outlook for its UK operations amid COVID-19 uncertainties, sending shares down 2% to a two-month low.
He also warned on Wednesday that the revenue growth of his more profitable international division would slow this year, even though he announced a 12.5% increase in group revenue in the first quarter.
The company said package volumes in its UK operations fell 13% in the quarter ended June 30 compared to a year ago, with international shipments entering Britain affected by the Brexit, reduced air freight capacity and higher transport costs.
“We continue to expect fluctuations in volumes as we move out of COVID restrictions, which we will have to manage accordingly,” said Royal Mail chairman Keith Williams.
Postal companies such as Royal Mail, UPS (UPS.N), FedEx (FDX.N), DHL (DPWGn.DE) and e-commerce company Amazon.com (AMZN.O) have seen demand for their mailing services. Home delivery increase as governments around the world have imposed strict lockdown measures to contain the coronavirus pandemic over the past year.
But as the UK government has gradually lifted restrictions since April, people have returned to malls and shopping streets. Read more
Ben Nuttall, analyst at research firm Third Bridge, said there were early signs that online shopping behavior was persisting, with Royal Mail’s domestic parcels in the first quarter still up 19% compared to 2019 levels.
“In the medium term, one of Royal Mail’s main challenges is its low level of parcel automation,” he said.
Royal Mail is building two fully automated parcel centers which are expected to be operational in 2023 in Warrington and Daventry.
Royal Mail has stuck to its 2021 revenue growth forecast for GLS, its global ground-based parcel network, although the postal company has said it will start to slow as the year progresses.
FTSE 100 shares are still up over 50% so far this year.
Reporting by Yadarisa Shabong in Bengaluru, editing by Sherry Jacob-Phillips, Anshuman Daga and Ana Nicolaci da Costa
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