Royal Mail share price falls as company raises stamp prices

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Royal Mail (LON:RMG) has announced that it is raising the price of first- and second-class stamps by 1p apiece. The British postal services group said in a statement today that from March 30, the price of a first-class stamp would rise to 63p while a second-class stamp would cost 54p.

Other price changes will see the cost of sending a large letter increase by 2p to 95p for first-class and by 1p to 74p for second-class. Meanwhile, the cost of sending a second-class medium parcel weighing up to 2kg would drop to £4.89, which Royal Mail said represented a saving of up to £3.11. The company added that a price cut for second-class small parcels that had been introduced as a Christmas promotion would continue.

Royal Mail said it had "thought carefully" about the impact of the postage price increases on customers and recognised how the recent tough economic conditions had made it difficult for consumers and businesses. However, the group insisted that the UK's postal service remained "among the best value in Europe".
In its last update, Royal Mail said letter volumes in the nine months to December 28 had dropped three percent -- better than analysts’ forecasts of a decline between four and six percent. Royal Mail said at the time that it believed improved economic conditions in the UK were behind the better-than-expected performance of its challenged letters business.

Royal Mail’s share price has been trading lower today. As of 14:00 GMT, the stock was changing hands at 424.00p – 0.68 percent down intraday. According to the Financial Times, the 17 analysts projecting 12 month price targets for the company have a median target of 440.00p, with a high estimate of 675.00p and a low of 350.00p. As of 10 February 2015, the consensus forecast amongst 25 polled investment analysts covering Royal Mail has it that investors should hold their position in the company.

As of 14:54 GMT, Friday, 27 February, Royal Mail share price is 423.90p.