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Royal Mail (RMG) Shares Plunged 12.9% on FedEx Profit Warning

Simon Mugo trader
Updated 16 Sep 2022

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Key points:

  • Royal Mail shares plunged 12.9% as investors brace for potential losses.
  • The company is currently losing £1 million daily and could sink into losses.
  • In addition, the parcels firm may lose customers if the standoff persists.

The Royal Mail PLC (LON: RMG) share pie plunged 12.9% today despite the parcels company not making any significant announcements. The move was triggered by the profit warning issued by US parcels delivery firm FedEx. Shares in Deutsche Post, the owner of DHL, fell 7%.

Investors reacted negatively to FedEx’s profit warning after the US multinational firm cited service challenges in Europe and macroeconomic weakness in Asis as the primary culprits behind a $500 million revenue gap recorded in the two regions.

Also read: A Guide to the UK’s Best S&P 500 Index Funds

Royal Mail’s problems arise from a tussle with its employees over higher pay. Despite the company reporting an adjusted operating profit of £416 million for the year to 31 March 2022, a significant jump from the £344 million it reported in 2021, its workers did not benefit from the same.

Royal Mail workers represented by the Communication Workers Union (CWU) had planned a walkout on 9 September 2022. Still, they called it off at the last minute and are now planning to strike on 30 September and 1 October 2022.

The two sides are yet to agree with the CWU protesting the 2% pay increase approved by Royal Mail, with the company countering that it had proposed a 5.5% salary increase, but the union had turned it down.

The parcels company has said it is losing approximately £1 million daily due to the uncertainty posed by the looming strikes as customers choose other parcel delivery companies that are not facing potential strikes.

Royal Mail is not the only British company dealing with strikes among its workers; railroad workers, BT call centre employees, and Openreach engineers have all staged strikes recently as they bargain for higher pay to deal with the record-high inflation witnessed in the UK.

Royal Mail could lose some or many of its long-time customers that might not like its workers’ constant threat of strike action. However, given the highly competitive nature of the UK and global parcels industry, these customers have multiple options to replace royal Mail.

*This is not investment advice.

Royal Mail share price chart.

Royal Mail share price 16-09-2022
Source: IG

The Royal Mail (RMG) share price plunged 12.9% to trade at 217.70p, falling from Thursday’s closing price of 249.95p.

Simon has over six years of professional trading experience across FX, commodities and equities. He has a strong passion for financial markets and is particularly focused on price action trading