May 2, 2018 / 8:17 PM / a year ago

E-commerce delivery demand lifts XPO 1st-qtr profit, but costs rise

SEATTLE, May 2 (Reuters) - XPO Logistics, one of the largest global freight transportation and warehousing companies, reported a rise in quarterly profit on Wednesday, fueled 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 like 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.

XPO is the second-largest less-than-truckload operator - truckers that consolidate multiple loads on a single truck.

It is also the largest provider of heavy goods deliveries like Home Depot Inc barbecue grills, 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, citing demand for order fulfillment services and final-mile deliveries. “Freight brokerage was up 30 percent (in revenue) because it was a great market and we had access to capacity,” he added.

XPO 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 same period a year ago.

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.

Despite the strong trucking market, the pounds of freight XPO carries daily and the number of daily shipments fell about 1 percent and 5 percent respectively compared with a year ago, as it tries to select more higher-margin freight loads.

The cost of running its freight brokerage rose to $23.4 million from $21.5 million, and last-mile delivery business costs climbed to $20.6 million from $15.1 million compared with a year ago.

XPO also said it will open 30 new hubs in North America by the end of the summer, for a total of 85. The costs were “a little drag on earnings in the first quarter, but they will grow into profitability shortly,” Jacobs said.

XPO has used rapid-fire acquisitions to grow from a $175 million truck brokerage company in 2012 to a $15.38 billion freight and logistics behemoth.

Investors are eager for details on XPO’s acquisition strategy and Jacobs reiterated on Wednesday XPO’s plans to make “one or two” big acquisitions by year end. (Reporting by Eric M. Johnson in Seattle; Editing by Dan Grebler)

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