XPO floats the new GXO


The world has a new logistics service provider. XPO Logistics has de-merged part of its business, floating a company now called GXO on the New York Stock Exchange on Monday, August 2, 2021.

GXO represents 38% of the sales of the previous XPO Logistics, and is structured around what the company calls the “pure-play contract logistics”. This is essentially the warehousing and fulfilment businesses of the old XPO Logistics. Its physical assets comprise 208m sq ft of warehouse space, split roughly half-and-half between North America and Europe. A further 3.5% or 7m sq ft is in Asia. However, the company describes itself as an “asset-light” provider of “e-commerce fulfilment and returns”.

With a revenue of $7bn over the past year and an estimated EBITDA (Earnings Before Interest, Depreciation and Amortisation) of $1.7bn, GXO says that half of its sales are from “e-commerce, omnichannel and technology”. It also emphasises that it is a technology company offering automated warehouses. This appears to be a key selling point for GXO, with it pointing out that 95% of warehousing in North America and Europe is traditional manual systems. The new company also believes that a key driver of growth will be e-commerce, which it implies could quadruple in the medium-term.

The rest of the old XPO Logistics, which retains the name XPO Logistics, will focus on transport in North America and Europe, especially road freight or what the company describes as “a leading provider of freight transportation, primarily less-than-truckload (LTL) and truck brokerage services”. Although it retains important road freight business in Europe, 74% of sales are in North America. Over the past quarter, these road freight businesses have seen an aggressive recovery with revenue up 44% year-on-year and resuming profits in contrast to the difficult Q2-20. XPO said that after exceptional items, EBITDA “was the highest of any quarter in XPO’s history” at $172m”.

Road freight is seeing a stronger market at present in both the US and Europe, although it might be facing higher costs in the near future. Certainly, Brad Jacobs, the Founder and Chairman of both businesses has made it clear in the past that he thinks that the ‘less-than-trailer load’ is the most attractive of the businesses of the old XPO. However, if the GXO really is as focused on automated fulfilment for e-commerce as it says it is, it would be expected to grow considerably.

Source: Transport Intelligence, August 5, 2021

Author: Thomas Cullen