Online shopping boom expected to aid Royal Mail’s sales growth

ROYAL MAIL is expected to unveil further sales growth as the delivery giant continues to be buoyed by its expanding parcel operation.

Earlier this year, the company saw parcels overtake letters as its main revenue source and the group is developing a second automated hub operation to open in 2023 with a capacity for one million parcels per day.

Investors will be hoping that this progress with parcels will maintain its strong momentum when Royal Mail posts a firstquarter trading update on July 21.

Demand for parcel deliveries have been boosted by an online shopping boom as people in lockdown sent gifts to loved ones.

Royal Mail will update shareholders about how this trend was impacted by the easing of lockdown restrictions in recent months.

The sales lift helped push the firm into the FTSE 100 in June, where it initially saw a fresh upward surge in its share price.

Susannah Streeter, senior investment and market analyst at Hargreaves Lansdown, said: “It was a slam dunk new entry in June, after opening a bulging sack of profits, but it’s lost ground over the last month as investors attempt to assess how the reopening of the economy could affect its prospects going forward.

“With high streets opening up, the e-commerce boom has showed signs of waning a little, although online retail sales remain significantly higher than prepandemic levels. Keeping a lid on costs going forward will be a challenge as delivering parcels is a more expensive business than light letters.”

In May, Royal Mail revealed pre-tax profits for the year to March hit £726m – up from £180m a year earlier.

This had been driven by a 16.6pc rise in revenues to £12.6 billion for the year, after a 38.7pc rise in its parcel operations offset a 12.5pc fall in letters being sent.

Royal Mail resumed its dividend payouts for the year and shareholders will be keen to hear more profit and dividend guidance for the current financial year.

Shareholders will be hoping the firm will be able smooth industrial relations with staff after a series of strikes.