Dive Brief:
- The pandemic resulted in more shippers looking for surge management in the first quarter, executives on XPO's first-quarter earnings call Tuesday. But this was not enough to bolster the company's revenue, which was down in its transportation and logistics segments, as some of the company's customers shuttered operations due to the pandemic.
- "Like others in the industry, we experienced a surge in volume late in the quarter from customers and the consumer-staples sector, both producers and retailers," XPO Chief Strategy Officer Matt Fassler said on the call. "This was related to meeting increased demand for food and dry goods as people stayed at home."
- XPO began experiencing the effects of the coronavirus pandemic toward the end of the first quarter, CEO Bradley Jacobs said on the company's earnings call Tuesday. "It started with our European operations in early March and began to affect parts of our North American business later in the month," Jacobs said.
Dive Insight:
XPO's experience was more or less par for the course in the first quarter with other fleets citing similar trends in April earnings calls.
Producers and retailers reached out to XPO for surge capacity in the first quarter, an XPO spokesperson told Supply Chain Dive in an email.
"One anecdote: A large wholesale retail chain reached out in mid-March, saying they were expecting a 50% increase in volume over the next six weeks," the spokesperson said. "We were able to handle a lot of that excess volume for them. We're still working with them. Demand is still really high."
In mid-April, Jacobs told shareholders 2020 will be a "lost year" for corporate earnings, for XPO and many other companies. But he said he was bullish on late 2020 and a "mega-bull" in the long term. In the earnings call, Jacobs said he was confident in XPO's performance moving forward, citing cost-cutting measures and investments in automation. Still, the company, like everyone else, is aware of the uncertainty of the current environment.
"We don’t know how the pandemic is going to play out," Jacobs said.
And while there were companies coming to XPO to ask for increased surge capacity, it wasn't enough to offset revenue declines. Revenue for the first quarter fell to was $3.86 billion compared with $4.12 billion for the same period in 2019.
XPO will benefit when automotive companies resume production in the coming weeks, executives said. The auto industry makes up "mid-single digits" of the company's revenue. U.S. auto manufacturers have been shutdown since mid-March.
One bright spot was the increased demand in e-commerce, which Jacobs said, "saved us in April, frankly."
"It's a great business to be in right now because it's not a cyclical phenomenon," he said, adding that "we expect some of these behavioral changes that are taking place during the pandemic to continue post-pandemic."
