Royal Mail share price closes lower as analysts flag strike concerns

Shares in Royal Mail Group (LON:RMG) closed more than one percent lower in London yesterday, pressured by downbeat comments by Liberum, which pointed to concerns over industrial action with the postal operator still trying to reach a deal with staff over its revised pension plan.

Royal Mail’s share price lost 1.7 percent to close at 386p yesterday, underperforming the broader UK market, with the benchmark FTSE 100 index ending the session 0.36 percent lower at 7,411.47 points. The group’s shares have lost more than a quarter of their value over the past year, and are down by some 16 percent in the year-to-date.

Liberum reiterated its ‘sell’ rating on Royal Mail yesterday, with a price target of 385p on the shares. Citywire quoted the broker’s analyst Gerald Khoo as explaining that danger of strikes at the group had risen after the Communications Workers Union ran an “extensive grassroots campaign to build support for industrial action” to protest changes to the final salary pension scheme. Royal Mail is currently trying to replace its defined benefit pension scheme with an alternative plan.

“The risks from industrial action lie predominantly in the likely modification of customer behaviour in the longer term, accelerating e-substitution in letters and the loss of market share in parcels,” the analyst pointed out, as quoted by the newswire, adding that Liberum also believed that “productivity improvements would be harder to deliver against an adversarial backdrop to industrial relations”.

The comments mark another blow for Royal Mail which was demoted from the benchmark FTSE 100 index last week. The privatised postal operator will drop out of the Footsie at the close of business next Friday, September 15, nearly four years following its float on the London Stock Exchange. 

As of 07:44 BST, Tuesday, 05 September, Royal Mail share price is 385.97p.