Royal Mail hoping to have competition licked

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Royal Mail will reveal whether its growing parcel business has beat off competition and offset declining letter volumes when it reports Christmas trading on Thursday.

The business reports its nine months trading next week, but has said its annual performance depends on Christmas - its busiest time of year.

In November the firm posted a 15% fall in half-year an adjusted pre-tax profit of £240 million, as parcel volumes rose by 4% and letter volumes fell by the same amount.

But Cantor Fitzgerald analyst Robin Byde said Royal Mail is well-placed to take advantage of the explosion of online shopping.

He points out that the firm has 11,700 local collection points, three times more than those of its nearest competitors.

Mr Byde said: "Mass migration to online buying is a huge challenge. Costs to deliver small volumes of packages to individual homes are far higher than those for high volume delivery to businesses."

Royal Mail has shed around 5,500 staff over the last 12 months and secured around £40 million of savings from a head office reorganisation.

Royal Mail chief executive Moya Greene has had a challenging year, which has been framed by the threat posed by the roll-out of Amazon's delivery network, which is expected to have an impact on the firm's targets for parcel delivery growth.

In July, the firm's regulator Ofcom said it would launch a ''fundamental review'' into the firm's operations that could see it impose a cap on prices.

Ofcom said its inquiry will look at whether current regulation secures ''the efficient and financially sustainable provision'' of the country's universal postal service.

The universal service is the Royal Mail's commitment to make deliveries to all parts of the UK at a flat rate, six days a week.

The watchdog, which first said it would look at this area last month, has become concerned at the weakening of competition in parts of the letters market.

The letter delivery arm of Whistl and parcel firm City Link have both folded in the last 18 months. The collapse of the letter service run by Whistl - formerly known as TNT - left the Royal Mail with no national competitor in this market.

Ofcom said it will look at the firm's position in the letters market ''and assess the company's potential ability to set wholesale prices in a way that might harm competition''.

The regulator says it may roll back some of the commercial flexibility it granted Royal Mail in 2012, including the ability to put up its prices, as the business has strengthened over the last three years.

The Royal Mail said it will participate fully in Ofcom's review. The watchdog is not expected to report until the middle of this year, but investors will study any comments the company has to say on the process.

In October the Government sold its final stake in the Royal Mail for just over £591 million.

A total of 13% was sold at a price of 455p per share, with the Government's final 1% holding gifted to eligible UK Royal Mail employees, raising their stake in the company to 12%.

The price is notably lower than 500p per share achieved in June, when a 15% stake in the business raising £750 million for the Government.

In total, it has raised £3.3 billion from the sale, with proceeds used to pay down the national debt.

Halfords is expected to see mild winter weather hold back car maintenance sales when the retailer posts its festive trading update on Thursday.

Analysts at Investec expect the bikes and car parts retailer to report flat third quarter like-for-like sales compared to a year ago, as warmer winter temperatures hinders sales of items like car batteries.

The broker forecasts like-for-like car maintenance sales down by 5%, while same store cycling sales will lift by 2.5%.

This comes after the retailer posted a fall in half-year profits in November after seeing bike sales slump and said earnings in the next financial year were also unlikely to grow.

Investec cut its 2016 full-year pre-tax profit forecast by 5% to £78.8 million.

Recently hired boss Jill McDonald put faith in a new turnaround plan to get its performance back on track, including a renewed push in the bike sector, with Olympian and Tour de France champion Sir Bradley Wiggins signed up to launch a new children's range.

Sir Bradley will help design eight bikes as part of his drive to get more children into cycling, with the range due to hit stores in July.

Ms McDonald unveiled her overhaul after a ''disappointing'' summer for bike sales, which dropped 7.6% on a like-for-like basis in the group's second quarter, down by 11% between mid-July and mid-August.

It was hit by poor weather and high promotional activity, while the sales fall was also compounded by tough comparisons from a year earlier.

The result was a particular blow for the group, coming in its peak bike selling season, and contributed to an overall 5.9% fall in underlying pre-tax profits to £46.4 million for the six months to October 2. Profits were 6.3% lower on a statutory reporting basis.

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the firm has 11,700 local collection points

Many of these smaller PO franchises don't have anywhere near the capacity to make local collect a realistic proposition if the service begins to grow in popularity. I collected from a PO recently who said they had to turn away local collect packets as they didn't have any more room. Which is understandable when you have bags of mail awaiting collection and often the space behind these secure counters is limited.