GXO Sees Growth Opportunity in Reverse Logistics

Yahoo

4 days ago

GXO delivered its highest organic growth in nine quarters with a 6 percent increase as the company ushers in its new CEO.
Total revenue when accounting for acquisitions and foreign exchange rates increased to $3.3 billion, up 16 percent year over year from $2.8 million in the year-ago quarter. Net income slowed to $26 million, down 32 percent from $38 million the year prior.
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Adjusted earnings were 57 cents per share, up from 55 cents last year and an improvement from the 55 cents expected by analysts from FactSet.
The company also updated its guidance, revising its adjusted EBITDA range upwards by $5 million on the back and front ends. The metric is expected to come in at $865 million to $885 million.
In a Tuesday earnings call, outgoing CEO Malcolm Wilson said GXO renewed and expanded contracts with two top customers in the quarter, with one being a multi-year agreement with H&M across multiple geographies. The third-party logistics (3PL) provider is also finalizing a nearly 20-year expansion of its business with a top-15 U.S. retailer, he said.
More than half of year-to-date contract wins (51 percent) are coming from new activity, which is a vastly different makeup compared to 2024's 29 percent. Last year, 46 percent of contract wins were won from competitors, compared to just 26 percent this year.
Wilson said the shift, particularly in the second quarter, was due to strong momentum in e-commerce. Levi's, Puma and Zalando are among the businesses that have teamed up with GXO on e-commerce automation projects. According to Wilson, more than half of the wins came from e-commerce sellers.
Wilson also highlighted what he called 'outsized' growth in reverse logistics, which now represents over 10 percent of GXO's current pipeline. Reverse logistics also accounts for a similar 'high-single-digit, low-double-digit' percentage of revenue, according to Kristine Kubacki, GXO's chief strategy officer.
Kubacki said the new e-commerce wins are driving the reverse logistics demand. The company is presently leveraging AI to enhancing reverse logistics capabilities and drive future growth opportunities.
'About a third of e-commerce orders are returned on average, which really reflects the material drag on our customers' margins,' Kubacki said. 'We can help unlock with AI the opportunity to rapidly resell products and help our customers unlock further margins. We're actually using that same tool that we've used on the inbound side around proactive replenishment on the back-end side for reverse logistics.'
GXO's growth across its business comes as the Stamford, Conn.-based company is seeing some changes at the top.
DHL Supply Chain veteran Patrick Kelleher, the CEO-in-waiting to replace Wilson, will take on the role starting Aug. 19.
Wilson won't be the only high-ranking member who is making his exit, with GXO unveiling Tuesday that chief financial officer Baris Oran plans to step down from his role. The company did not give a timeline for Oran's exit, but the company said he would remain in the role until a successor is named to ensure a smooth transition.
The company has also seen an influx of seven new board members since May, with five of them newly elected at the firm's annual shareholder meeting. Two more were appointed on July 31. GXO has 10 board members in total, three of whom were reelected at the meeting.
Wilson said in the call that it was too soon to think about how the future of the company will play out amid the overhaul.
'We have to give Patrick time to get to know the company, and also our new board members time to acclimatize to GXO,' Wilson said. 'I'm sure that things will start to unfold as we start the planning process for 2026 and beyond.'
The logistics company is currently implementing a new ERP system across its three main geographic regions, with 'phase two' of the deployment already going live in the U.K.
This software deployment is set to take place in the U.S. next, before it will be extended to continental Europe, Oran said during the call.
During the quarter, GXO got the regulatory go-ahead from the U.K. to move forward with its $965 million acquisition of Wincanton. GXO must divest some of Wincanton's grocery contracts in the U.K. as part of the approval.
And in June, the contract logistics provider launched GXO IQ, a technology that leverages a suite of proprietary AI algorithms that can orchestrate millions of complex, multi-step actions across inventory distribution and movement, order picking and packing, shipping, and staffing.