Dive Brief:
- Less-than-truckload carriers’ retail accounts outperformed persistently stagnant industrial demand in Q3, continuing a trend observed in the previous quarter, executives said in recent interviews and earnings calls.
- Demand from construction and agriculture customers remains particularly soft, XPO Chief Strategy Officer Ali Faghri told Trucking Dive in an Oct. 30 interview.
- “On the positive side, we're seeing better results on the machinery and automotive side,” Faghri said. “On the net, we characterize it as soft but stable.”
Dive Insight:
LTL carriers like XPO, Saia, Old Dominion Freight Line typically have a freight mix of about two-thirds industrial and one-third retail shipments. Industrial shipments, which are usually heavier, tend to be more profitable.
Saia’s freight mix remains “a little bit more tilted to retail right now,” CEO Fritz Holzgrefe told Trucking Dive in an Oct. 31 interview, though some shipments can be difficult to categorize.
“A bucket of paint — is that industrial, or is it not?” he said.
Some retail customers such as Walmart are presenting additional issues for carriers. The world’s largest retailer has taken advantage of cheaper truckload rates by opening facilities to consolidate LTL shipments into full trailers.
Persistently weak industrial demand has been Old Dominion Freight Line’s challenge for the past two years, with the Institute for Supply Management reporting manufacturing contraction for nearly a two-year span, CFO Adam Satterfield said on an earnings call last month.
“That's certainly showing in our numbers,” Satterfield said.
XPO anticipates industrial demand could begin picking up again heading into next year, Faghri said.
"We think lower interest rates and moving past the elections will be a key catalyst to drive that improvement," he said.
