E-commerce delivery demand lifts XPO first-quarter profit, but costs rise

XPO Logistics, one of the largest global freight transportation and warehousing companies, reported a rise in quarterly profit on Wednesday, fuelled 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 percent 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 percent (in revenue) because it was a great market and we had access to capacity,” he added.

XPO shares were off more than 1 percent in light after-market trade after it reported first-quarter profit of $66.9 million, or 50 cents per diluted share, compared with $19.5 million, or 16 cents per diluted share in the year-ago period.

Adjusted for one-time items, XPO earned $80.9 million for the quarter, or 61 cents per share, up from $37.9 million, or 30 cents a share, a year ago. Wall Street analysts expected 51 cents per share.

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 on Wednesday 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.