Royal Mail anticipates permanent shift to online sales

Royal Mail parcel volumes retreat as online boom eases

Royal Mail (LON:RMG) revealed its parcel deliveries slowed during the previous quarter as the pandemic-induced boom in online sales lost some momentum.

However, the parcel delivery company also suggests that the trend established during the pandemic is here to stay.

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Royal Mail’s revenue during the quarter ending in June 2021 is up by 12.5% from the year before. When compared to the same period in 2019, before the pandemic, it has increased by 20.2%.

Despite the volume of parcels being sent falling by 13%, income generated from parcels increased. This is down to Royal Mail achieving a better product mix, the company said.

Speaking before the FTSE 100 company’s annual shareholder meeting on Wednesday, chairman Keith Williams said: “As expected, parcel volumes decreased and letter volumes increased compared to the exceptional period last year encompassing the UK’s first lockdown, when non-essential retailers closed for the first time.”

“We are starting to see evidence that the domestic parcel market is re-basing to a higher level than pre-pandemic, as consumers continue to shop online.”

Williams added that it is too soon to know what’s in store for the remainder of the year due to uncertainty, particularly with regard to Covid-19. The Royal Mail chairman is retaining a sense of optimism.

Ben Nuttall, Senior Analyst at Third Bridge, provided additional context to the results announced by Royal Mail on Wednesday.

“As the UK begins to open up parcel volumes have declined compared to last year down 13%, but there are early signs that some of the behaviour of buying online is sticking as domestic parcels remain 19% above 2019 levels,” Nuttall said.

“International parcel volumes were down more, as we still see impacts of passenger flights reducing air freight capacity and increased conveyance costs as well as Brexit impacts while the country transitions into a new trade deal.”

“Overall structural letter decline continues compared to 2019, but there is a nice jump from last year as businesses reopen compared to the same period last year.”

“Any decline in volumes in parcels has been more than offset by pricing increases, showing lasting benefits for Royal Mail of delivering last year under tough conditions when we all wanted home delivery.”

The Royal Mail share price is down by 1.32% during the morning session on Wednesday to 523.60p

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