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It is cutting costs by more than £350 million to help offset the hit. They said it would also have to look at price increases for posting letter and parcels.
The cost of posting letters has already increased by an average of around seven percent, and parcel prices by an average of about four percent.
The group cautioned over “significant headwinds” as it faces higher wage demands, surging energy and fuel costs.
It comes as Royal Mail reported an eight percent rise in underlying operating profits to £758 million for the year to the end of March.
On a reported basis, pre-tax profits fell 8.8 percent to £662 million.
The organisation said it was at a “crossroads” in its overhaul as parcel delivery becomes ever more important.
It is telling customers to expect prices to rise as the group contends with higher wage demands, surging energy and fuel costs.
Simon Thompson, chief executive of Royal Mail, said: “As we emerge from the pandemic, the need to accelerate the transformation of our business, particularly in delivery, has become more urgent.
“Our future is as a parcels business, so we need to adapt old ways of working designed for letters and do it much more quickly to a world increasingly dominated by parcels.”
He added: “Our focus now is to work at pace with our people and our trade unions to reinvent this British icon for the next generations, so that we can give our customers what they want, grow our business sustainably and deliver long-term job security for our great team.
“We have no time to waste.”
In March, the service hiked the price of a first-class stamp by 10p to 95p due to declining letter volumes and rising costs due to inflation.
Nick Landon, the group’s chief commercial officer, said Royal Mail understood many companies and households were “finding it hard in the current economic environment”.
The rise in prices can be credited to a decrease in people sending letters alongside an increase in addresses.
Mr Landon continued: “While the number of letters our postmen and women deliver has declined from around 20 billion a year to around seven billion since 2004/05, the number of addresses they have to deliver to has grown by around 3.5 million in the same period.
“We need to carefully balance our pricing against declining letter volumes and increasing costs of delivering to a growing number of addresses six days a week.
“As customer needs change and we see a greater shift from letters to parcels, it is vital that the Universal Service adapts to stay relevant and sustainable.
“These prices changes are necessary to ensure we can continue to maintain and invest in the one-price-goes-anywhere Universal Service for future generations.”
