business

XPO Logistics CEO Says Company Is in the Middle of the ‘E-Comm Boom'

Scott Mlyn | CNBC
  • "In our logistics business, we are squarely in the middle of this massive e-commerce boom," XPO Logistics CEO Brad Jacobs said in a "Mad Money" interview after the company announced a spinoff.
  • XPO Logistics is looking to separate its warehousing business from the transportation segment in an effort to unlock value that's "trapped inside this conglomerate structure."
  • The spinoff is expected to go into effect in the second half of 2021.

The online shopping craze has delivered a windfall for the shipping industry, and global warehouse providers such as XPO Logistics are reaping benefits, CEO Brad Jacobs told CNBC's Jim Cramer on Wednesday.

"In our logistics business, we are squarely in the middle of this massive e-commerce boom," he said in a "Mad Money" interview.

XPO Logistics reports e-commerce to be its fastest-growing vertical. Internet commerce has powered a warehouse expansion in the industry, leading to 70 million square feet of storage space to be added this year alone, with still more room for growth.

XPO Logistics says it is the largest provider of last-mile services for heavy goods in the U.S.

In the U.S., Black Friday online shopping spiked 22% to a record $9 billion and Cyber Monday saw a record $10.8 billion spent online in one day, according to Adobe.

"We have the largest outsourced e-comm fulfillment platform in all of Europe, we're very big in omnichannel, we're huge in reverse logistics, and we have a big presence in cold chain," Jacobs said. "So, all of the hottest parts of supply chain powered by this e-comm boom, we're right in the middle of that."

The company, which announced Wednesday that it would separate its logistics and transportation businesses from one another, reported bringing in $1.58 billion in its logistics business in its most recent quarter. That figure was up 4.6% from a year ago.

While the coronavirus pandemic affected other areas of XPO Logistics' operations, demand for e-commerce and other consumer-related verticals produced $77 million in operating income, the company said, up from $61 million in the year-ago quarter.

XPO Logistics, which Wall Street values to be worth $10.1 billion, plans to spin off its warehousing and logistics business into a separate publicly traded company. The new company, which has about 200 million square feet of warehousing capacity, will focus on e-commerce fulfillment. The split is expected to come in the second half of 2021.

The move to split the companies comes after management sought ways to unlock value that Jacobs said is "trapped inside this conglomerate structure."

The company's goal is to simplify the business and make it more attractive on the market to investors, in comparison to competitors such as DHL, Old Dominion and DSV.

"By separating into two global segments — two separate public trading companies, two real powerhouses — leaders in logistics and transportation, we've got two strong companies that are really easy to understand," Jacobs said.

Shares of XPO Logistics slipped 0.37% Wednesday to $110.01 at the close. In the after-hours, the stock is up 1.63% after the announcement of the split.

The stock is up 38% year to date.

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