Dive Brief:
- Hub Group spent $8.4 million in Q3 to realign its network by consolidating warehouses in a move seeking to better position the 3PL, according to an earnings release.
- The initiative, launched in H2, seeks to improve operational efficiency by integrating its final mile, consolidation and fulfillment networks, the company said.
- “We anticipate that the network alignment initiative will improve service to our customers and operational efficiency and allow us to better compete for new business,” EVP, CFO and Treasurer Kevin Beth said on an earnings call last month.
Dive Insight:
Restructuring for operational efficiencies has brought savings for other industry players amid the challenging freight market, from C.H. Robinson Worldwide to Werner Enterprises.
C.H. Robinson’s workforce, which exceeded 18,000 in Q3 2022, plummeted to 14,085 two years later as part of a cost-savings plan.
For Hub Group, the network realignment costs are declining and expected to end in Q4, CEO, President and Vice Chairman Phil Yeager said on the call. The expenses include transferring product and a bump in labor costs, he said.
“We estimate these expenses will be $3.5 million to $4.5 million in the fourth quarter for the transition, which will position us with a fully integrated and highly utilized Hub Group network in 2025,” Yeager said.
Operating income for the company was $32.1 million for Q3, a 25% year over year decrease.
Hub Group profits fall from COVID-19 surge
But improvement initiatives to the business over the years are improving performance along with acquisitions to build out stability, Beth said.
“While we compete in a cyclical marketplace, these actions have accelerated trough to trough results, with operating margin growing from 2% in 2017 compared with the 4.3% reported this quarter,” he said.
