E-commerce delivery demand lifts XPO 1Q profit but costs rise

Reuters : XPO Logistics, one of the largest global freight transportation and warehousing companies, reported a rise in quarterly profit last week fueled by strong demand for deliveries of online purchases offsetting higher costs.

The Greenwich, Connecticut-based company said it was forced to raise wages for employees such as warehouse and dock workers and truck drivers in certain markets by as much as 5% amid a tight U.S. labor market and an overall truck driver shortage.

It plans to pump more than $450 million into new technology in 2018, while adding 30 new hubs to reduce the transit times for deliveries of products bought online.

XPO is the second-largest U.S. less-than-truckload carrier - truckers that consolidate multiple loads on a single truck - and the largest provider of heavy goods deliveries such as Crate and Barrel furniture and Best Buy Co Inc televisions from warehouses directly to homes in North America, making or managing about 35,000 deliveries daily.

“E-commerce was a grand slam for us,” XPO Chief Executive Officer Brad Jacobs said by phone. “Freight brokerage was up 30% (in revenue) because it was a great market and we had access to capacity,” he added.

Jacobs said costs related to opening 30 new hubs in North America by summer’s end, for a total of 85, were “a little drag on earnings in the first quarter, but they will grow into profitability shortly,” Jacobs said.

The cost of running its freight brokerage rose to $23.4 million from $21.5 million, and last-mile delivery costs climbed to $20.6 million from $15.1 million compared with a year ago.

Investors are eager for details on XPO’s acquisition strategy and Jacobs reiterated plans to make “one or two” acquisitions by year end.

XPO has used acquisitions to grow from a $175 million truck brokerage company in 2012 to a $15.38 billion freight and logistics behemoth.