GXO is bullish on the direction of the overall freight market, as the contract logistics provider sees progress in the movement of volume within its network.
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“We believe we saw the bottom of the inventory cycle in the fourth quarter of last year,” said GXO CEO Malcolm Wilson in a second-quarter earnings call. “We’re beyond that inflection point, and we’re seeing volume trends beginning to improve. At an industry level, e-commerce has returned to sustainable structural growth.”
In the second quarter, GXO still faced negative volume comparisons from a year ago, but these comparisons represent an improvement over the year-over-year numbers provided in the 2023 fourth quarter.
“When you look into the underlying volume and network consolidation assumptions, in Q2, clearly, we were negative,” said Baris Oran, chief financial officer of GXO, during the call. “And in Q3, we expect a similar trend and somewhat easing up into Q4, reflecting an easier comp versus the Q4 of last year.”
Major logistics players like UPS , DHL and FedEx have all seen volumes have a similar stabilization in their most recent fiscal quarter as they continue to navigate a freight recession. All have projected that the year-over-year volume improvements will continue into the holiday season.
GXO had a revenue bump of 19 percent year over year to $2.8 billion, up from $2.4 billion in the second quarter of 2023. Organic revenue grew by 2 percent, as much of the revenue came via the company’s $965 million acquisition of U.K.-based logistics services company Wincanton . In a research note, UBS said the 2 percent revenue growth is “indicative of GXO’s business momentum continuing.”
New business contracts at GXO totaled $270 million in the second quarter, with an additional $63 million already signed for 2025.
“We signed more new business in our North American business recently than for a long time,” Wilson said. “I think we’re on target for a record in our North American activity for new business signings.”
Half of the new business wins in the quarter came from outsourcing, said Oran.
“We believe such new contract wins underpin a defensive growth amidst a weaker consumer and weaker freight backdrop,” said the UBS note, with the investment bank saying that GXO is “poised for further revenue expansion within the consumer market and that visibility toward peak season is increasing.”
Net income at the contract logistics provider was $39 million, down from $66 million in the year prior.
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While many retailers and brands have imported goods into the U.S. earlier this year ahead of the peak shipping season, GXO doesn’t believe its current influx of inventory has as simple of an explanation as a pull forward.
According to Wilson, customers in certain verticals are bringing in product earlier, but he believes the earlier timelines are attributed to a desire for nearshoring, as well as the “added degree of safety” that comes with more automated warehousing capabilities.
“In terms of our consumer-driven business, right now, I think we are just naturally seeing an elevating return to a more normalized level of inventory holding in our warehouses to support a normal kind of business planning cycle that our customers are having,” said Wilson.
Wilson noted that GXO’s inventory improvements are a part of what he thinks “will be a very traditional holiday season.”
GXO reiterated its 2024 full-year guidance, with expectations to deliver organic revenue growth of 2 percent to 5 percent, adjusted EBITDA of $805 million to $835 million and adjusted diluted earnings per share of $2.73 to $2.93.
The company also said AI deployment across facilities is up tenfold year-over-year in 2024.
According to chief strategy officer Kristine Kubacki, GXO is using AI for a variety of use cases across fulfillment, including picking optimization, managing inventory flow and predicting SKU replenishment modes.
Kubacki said the AI implementation reduces cycle times, improves capacity and dramatically improves efficiencies for customers.
The chief strategy officer, who joined GXO in April, delved into some of the company’s “humanoid” robotics deployments across its sites, via partnerships with Apptronik and Agility Robotics .
“They have the capability of performing dynamic tasks in a human way, and they are developed to make human-like decisions. They’re also highly suitable for it to perform some repetitive heavy lifting type tasks and really work along with our associates,” Kubacki said. “We believe that the humanoid category will really explode over the next couple of years. And therefore, we’re really leaning into the humanoid space via our operational incubator program.”
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