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Royal Mail share price: what’s the latest ahead of its Q3 results?

The British postal service will unveil its Q3 earnings next week, with it desperate to strengthen its parcel delivery network in a world that no longer sends letters.

Royal Mail continues to see its share price slide in 2020, with it down nearly 10% year-to-date, with the British postal service under pressure to deliver signs of meaningful change in its Q3 results on 6 February.

The British postal service is struggling in a world that no longer sends letters, with Royal Mail seeing a 5% decline in letter volumesin its first six months of trading this financial year.

With this valuable revenue stream drying up fast, the company’s share price continues to tumble, with time running out for Royal Mail CEO Rico Back to modernise the postal service.

Royal Mail closed at 203p a share on Tuesday.

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Royal Mail looks to parcels to offset declining letter volumes

The path ahead for Royal Mail is to offset declining letter volumes by focusing on the growing its share of the parcel market, with sales up 5.6% in its first six months of trading.

The postal service is also well-positioned to capitalise on this burgeoning segment, with it boasting a strong distribution network, albeit one set up primarily for handling letters, thus requiring significant investment to expand and improve the efficiency of its parcel business.

Royal Mail also faces stiff competition in the parcel market, with rivals like Hermes relying on gig economy delivery drivers to grab e-commerce contracts at price points the postal service will struggle to compete with.

However, work has begun in Warrington where one of three major parcel delivery hubs is being built, with the aim of modernising its parcel delivery network.

The new parcel-orientated network, which will require around £1.8 billion worth of investment to complete, is expected to be up and running by 2024.

But five years is a long time for investors to wait for meaningful change to be delivered, with Royal Mail also having to constantly battle the Communication Workers Union, which continues to threaten strike action.

Do you own Royal Mail shares? You can hedge your downside risk with IG by trading CFDs and spread betting.

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