XPO Logistics’ stock took a hit late last week after it revealed that its largest customer curbed its business with the last-mile delivery company.
According to a report in Reuters citing current and former XPO employees, the customer is thought to be Amazon and that the sales cut was by two-thirds. XPO’s stock declined after missing fourth-quarter expectations; the company warned revenue could dip $600 million this year because of a slowdown in business from its largest client, which the employees said was Amazon. Analysts echoed the sentiment, with Reuters pointing to Brian Ossenbeck, an analyst at JP Morgan. In a research report, the analyst said he thinks the shipping company is “paring down its parcel injection, brokerage, last mile, and logistics activity” with Amazon.
Amazon accounted for $900 million of revenue at XPO in 2018, reported Reuters.
On a conference call with analysts to discuss fourth quarter results, XPO chief executive Bradley Jacobs only said it was its largest customer. At the end of January XPO announced it was closing a facility with California's Employment Development Department.
One employee told the news service that XPO is shutting down facilities in Aberdeen, Maryland; Edgerton, Kansas; and Rialto, California, all of which count Amazon as a customer. Another employee said a 571,000 square foot facility in Aberdeen, Maryland was in charge of work for Amazon. Meanwhile, when XPO’s Edgerton, Kansas plant opened in 2016, a broker was quoted in the Kansas City Business Journal as saying Amazon was the client for the 500,000 square foot warehouse, reported Reuters.
XPO Logistics is a telling example of what may become of last-mile delivery partners as Amazon forges it alone.
It has been making heavy investments in building it own shipping and delivery services, which puts the likes of FedEx, USPS and United Parcel Services on the defense. Its also impacting the trucking industry that has been in charge of moving products from one distribution center to the next. Amazon is in expansion mode, eyeing XPO’s area of heavy and bulky warehousing and delivery, reported Reuters.