Royal Mail sees parcels revenue fall

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Royal Mail has warned that price changes and competition from rivals have hit its parcels business.

Parcels revenue was down 1% in the three months to 29 June compared with the same period last year, Royal Mail said.

However, the company said it was still likely to meet expectations for its overall annual performance.

The firm expects revenues from its letters business and "cost controls" to offset the lower parcels revenue.

Reorganisation

Royal Mail said it was facing "increasing challenges" in the UK parcels market, including competition from carriers "aggressively reducing prices".

Changes to Amazon's minimum order level for free delivery, together with the expansion of the online shopping giant's delivery network, also had an impact on revenues, Royal Mail said.

The firm's parcels export business was hit by competition and a strong pound, Royal Mail added.

Despite lower parcels revenues, Royal Mail said it expected to meet its yearly targets.

It said that although letter volumes decreased by 3%, its letters revenue was up by 3% due to increases in stamp prices and letters "traffic" during the elections.

The firm also expects to make £25m in savings through a "management reorganisation programme" announced in March.

Royal Mail added that it had submitted evidence to regulator Ofcom setting out its concerns about the "threat to the universal postal service" caused by "unfettered cherry-picking of high density urban areas" for direct delivery competition.