Royal Mail’s shares leapt 3% this morning after it posted a pretty upbeat trading statement for the last nine months. Letter revenues fell 1%, predictably (who sends those anymore?), but parcel volumes were up 4% as the company cashed in on the ever-growing rise in online shopping.
The company said it handled 130 million packages in December alone, up 6% on last year. ‘Once again, our postmen and women delivered a great Christmas – even better than last year’s strong performance,’ said chief exec Moya Greene.
It’s an improvement in performance but Royal Mail isn’t raking it in as much as you might think. Parcel volumes might be up 4%, but revenue from those parcels was only up 1% - apparently because of ‘the impact of the competitive environment and the trends in mix’. Cutting prices to keep up with its rivals and changes in the type of parcels it is dealing with, in other words.
Parcel carriers like UPS, DPD and Hermes have invested heavily in beefing up their networks over the last few years in a bid to nab a bigger share of the online shopping market. Revenues in the sector were up 6% last year according to consultants Apex Insight, suggesting Royal Mail’s overall market share could be on the slide. Today’s update might be some welcome good news after a period of uncertainty, but Royal Mail has plenty of challenges ahead.