FedEx’s planned spinoff of its LTL unit, FedEx Freight, has captured competitors’ — and Wall Street’s — attention.
Executives at Old Dominion Freight Line, XPO, Saia and ArcBest all fielded questions from analysts during recent Q4 earnings calls about how the move might affect them and the broader LTL market.
Most of the carrier leaders refrained from commenting too much about their largest rival, which is also adding hundreds of salespeople and a new leader. But their answers provided a glimpse of how they’re thinking about the upcoming move, and how it could affect the industry.
Old Dominion expects FedEx to show ‘continued discipline’
Old Dominion Freight Line will be watching for any change in the competitor’s go-to-market strategy, CFO Adam Satterfield said on an earnings call, without specifically mentioning FedEx Freight by name.
“But I think otherwise, as a standalone [company] and [with a] brighter light maybe shining on the business, I would expect to see continued discipline there,” Satterfield said. “I think the opportunity is there for the industry.”
The CFO reminded investors that only half of bankrupt Yellow Corp.’s service centers have been reallocated to other LTL carriers, meaning the industry remains capacity-constrained even as many reopen under other carriers’ logos.
“The old saying about taking two inches off a blanket, and sewing it on the other end of the blanket — it doesn't give you a longer blanket,” Satterfield said.
President and CEO Marty Freeman said Old Dominion’s sales workforce turnover is less than 1% per year, with most of that coming from retirements or promotions.
“We treat them fair and pay them well,” he said. “The least of my concerns is losing our salespeople to a competitor.”
XPO views a validation of industry dynamics
The planned spinoff reinforces the LTL industry’s strong dynamics with carriers being scored on margin improvement driven by yield performance, CEO Mario Harik said on the earnings call.
Harik knows the benefits of operating as a pure-play LTL firsthand: XPO similarly executed a spinoff of most of its other business units a few years ago.
But he also minimized somewhat how much FedEx Freight’s move might affect XPO’s business.
“I mean, they are a competitor today, they'll be a competitor tomorrow,” the CEO said.
Saia sees an opportunity to offer undisrupted service
Saia will be watching the spinoff, but it’s focused on taking care of customers “that need consistent, undisrupted service from the provider,” President and CEO Fritz Holzgrefe said on an earnings call.
“Think about the challenging macro environment that some of our customers are having to deal with,” Holzgrefe said. “They probably don't want to deal with a lot of change from an LTL provider. So the opportunity for Saia there is provide sort of a high level of service, limited disruption to the customer in a tough environment.”
Saia is taking a similar approach as it seeks to retain its leadership, sales teams and other employees.
“We think about providing a great place to work, great career opportunities, [and] keep a very high level of engagement in our workforce,” the CEO said.
ArcBest anticipates it will be a ‘big, noteworthy event’
ArcBest considers the looming FedEx Freight spinoff “a big, noteworthy event,” CEO Judy McReynolds on an earnings call.
McReynolds pointed to ArcBest’s promotion of Eddie Sorg to chief commercial officer as a primary strategy for retaining and adding customers through the spinoff. Then she turned the conference call over to President Seth Runser to elaborate.
“We have a tremendous opportunity with the markets we operate in, having over $400 billion worth of potential,” Runser said. “So, we have a lot of potential to expand within our current loyal customer base alone. And we want to make sure we price that, that aligns with the value that we provide.”
ArcBest promoted Sorg to capitalize on the opportunities ahead, the company president said.
“We just need to do a better job on the execution front, and that's why we announced these changes,” Runser said. “So, by aligning sales, marketing, yield, [customer experience], all under one leader, we have the opportunity to capitalize on those opportunities that we see.”
