Royal Mail UK parcel volumes fall, outlook uncertain as COVID-19 curbs ease

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Royal Mail Plc said Britons are having fewer parcels delivered to their homes as pandemic curbs are lifted and it withheld from offering an annual outlook for its UK business due to COVID-19 uncertainties, sending shares down 2% to two-month lows.

It also warned on Wednesday that revenue growth at its more profitable international division would taper off this year, even as it reported a 12.5% rise in group revenue in the first quarter.

The company said parcel volumes in its UK business fell 13% in the three months ended June 30 from a year ago, with international shipments coming into Britain affected by Brexit, reduced air freight capacity and higher transport costs.

“We continue to expect fluctuations in volumes as we emerge from COVID restrictions, which we will need to manage accordingly,” Royal Mail Chairman Keith Williams said.

Postal companies such as Royal Mail, UPS, FedEx, DHL and e-commerce firm Amazon.com saw demand for their home delivery services surge as governments worldwide imposed strict lockdown measures to contain the coronavirus pandemic over the past year.

But as the British government has gradually lifted restrictions since April, people have returned to shopping malls and high streets.

Research firm Third Bridge analyst Ben Nuttall said there were early signs that online buying behaviour was sticking, with Royal Mail’s domestic parcels in the first quarter still up 19% on 2019 levels.

“In the medium-term, one of the key challenges for Royal Mail is its low level of parcel automation,” he said.

Royal Mail is constructing two fully-automated parcel hubs which are expected to be operational in 2023 in Warrington and Daventry.

Royal Mail stuck to its 2021 revenue growth forecast for GLS, its worldwide ground-based parcel network, even as the postal company said it will begin to slow as the year progresses.

Shares in the FTSE 100 company are still up more than 50% so far this year.