XPO’s Jacobs Sees E-Commerce as Key to Robust Growth in 2017

This story appears in the Feb. 20 print edition of Transport Topics.

KEY BISCAYNE, Fla. — XPO Logistics Inc. CEO Brad Jacobs won’t rest on turning a profit with a company that lost money as recently as 2015, telling Transport Topics that he’ll “double down” on growing on the e-commerce wave through contract logistics, less-than-truckload and last-mile delivery services.

During a presentation here at the 2017 Stifel Transportation & Logistics Conference, Jacobs ruled out any new acquisitions for his company after a flurry of activity over the past few years. Rather, he told TT that his focus will be on capitalizing on and improving upon the hard work he’s already put into the company.

“We’ve stopped acquisitions and refocused the organization on operational excellence and high levels of customer service, which is translating into massive increases in our EBITDA [earnings before interest, taxes, depreciation and amortization], profitably and cash flow,” Jacobs said.

The Greenwich, Connecticut, company, which will report fourth- quarter and full 2016 earnings Feb. 21, expects $1.25 billion in adjusted EBITDA for the year. XPO projects $1.35 billion at the end of 2017 and $1.58 billion in 2018. Financial analysts and accountants use the financial metrics as a method to determine an overall value of a company.

“How will we meet those targets? First, we’re getting the full-year benefit from actions we took during 2016. Second, we have mid-single digits of organic growth forecast. Third, we have global procurement efforts that are going into Phase 2 into 2017 to address all levels of our spending, getting good discounts from our large purchasing power,” Jacobs said. “We’re also transferring best practices around the globe, rolling out playbooks on how to improve productivity and efficiency at [our] 750 warehouses and 450 LTL cross-dock facilities around the world. All these initiatives will increase our profitability.”

Contract logistics and last-mile delivery of larger items purchased online are the fastest area of growth, Jacobs said, and XPO arranges more than 12 million deliveries per year in North America of such items as refrigerators, dishwasters, ovens, electronics, fitness equipment and furniture.

“There’s not a lot of transportation companies that have the expertise to facilitate those online transactions efficiently and professionally,” Jacobs said. “We’re No. 1. We’re approaching $1 billion in revenue in that business, and if you take the next three competitors and combine them, they add up to one-third of our size.”

According to XPO, 37% of gross revenue in fiscal 2016 came from contract logistics and e-fulfillment, 24% from North American less-than-truckload, 8% from truck brokerage and expedited shipments in North America, 6% from last-mile delivery of heavy goods and e-commerce and 6% from intermodal and drayage.

“The parts of our company that relate to e-commerce and e-fulfillment are growing the fastest because that’s where the world is going,” Jacobs said. “We have significant exposure to e-commerce in North America in contract logistics and last-mile delivery, and we’re going to double down on it.”

He told TT that his other big initiative is employee satisfaction, pointing out that 68% of respondents in an internal survey claimed to be highly engaged and satisfied, but nearly 4% were dissatisfied. XPO conducts the survey quarterly.

“We have to listen to their problems and try to solve them, if possible,” Jacobs said. “It’s a big mission of ours to continually raise the level of employee satisfaction because we have 700,000 hours worked per day around the world, so if the employees love what their doing, love their co-workers and the company, they’ll be much more productive than if they’re apathetic.”

XPO Logistics ranks No. 3 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers. It also ranks No. 2 on the Transport Topics Top 50 list of the largest logistics companies in North America.