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Royal Mail Shares Keep Climbing On Soaring Parcel Deliveries

Practice Stock Trading
Updated: 11 September 2020

Royal Mail (LON: RMG) shares have continued to climb, rising more than 5% after the postal company predicted an increase in parcel deliveries this year.

The lockdown restrictions have seen a rise in parcel deliveries as consumers turned to online shopping during the height of the coronavirus pandemic.

In its AGM statement on Tuesday, Royal Mail stated that parcel volumes had increased 34% in the five months leading up to August 30th and that its revenue was up 33.1% year on year.

However, a fall in letters and an increase in overheads did dampen the overall positive update. The business made it clear that its legacy in letters had held back the operational changes needed to adapt to a market that has more parcels than letters and therefore resulted in increased costs of £85 million.

Royal Mail also saw increased costs due to the COVID-19 pandemic with elevated absences, social distancing, and additional protective equipment costing the company £75 million during the five months.

The negative news did not deter investors as the company’s shares closed 25% higher on the day.

Its statement highlighted that it is going through a management restructure that will deliver a £130 million cost-benefit for the company from Fiscal Year 2021-202.

Looking ahead, Royal Mail did not provide any specific guidance but commented that its costs are likely to remain elevated for the rest of the year.

Royal Mail share price…

Royal Mail (RMG)/Source: TradingView

Royal Mail shares have continued to run higher after the statement on Tuesday and are currently trading at 231.8p per share, up 5.11% after climbing as high as 237p earlier in the session.