The retail sales spurt
US retailers had an exciting holiday season in the last weeks of 2017. A quick look at the stocks of major retailers in the United States (HD) (LOW) (FND) will corroborate that. Wedbush Securities’ analyst Seth Basham noted that YoY (year-over-year), holiday sales were strong.
Basham and his team noted, “Ecommerce continues to take channel share from bricks and mortar, accounting for an estimated 20% of holiday sales (and 10% of total retail sales). While retailers such as WSM, BBBY and PIR continue to adapt, we believe they not only continue to lose share to online retailers including Amazon (AMZN) and Wayfair (W), but also face increasing costs of serving omnichannel shoppers.”
Can Home Depot and XPO Logistics come together?
Home Depot (HD) is a pure home improvement retailer in North America. On the other hand, XPO Logistics is a worldwide provider of supply chain solutions. With acquisition talks, XPO’s market capitalization has increased from $9 billion to $15 billion.
XPO Logistics has its own war chest of $8 billion for strategic acquisitions. Its past acquisitions clearly point out its desire to be a top-notch player in the US logistics and transportation (IYJ) sector. Some investors are looking at the company in light of its US and global ambitions to become a top-ranked carrier.
Let’s look now at Home Depot and its last-mile shipping needs. XPO Logistics specializes in last-mile delivery to customer’s home in the United States, which could help HD in its endeavors to cater to customers in the delivery space.
However, Oppenheimer analysts Brian Nagel and David Bellinger are skeptical about the deal materializing. They noted that XPO’s last-mile logistics business revenue is just 6% of its total revenue. They also noted that buying out a transportation company the size of XPO would push Home Depot into a completely different line of business.
HD and AMZN currently use XPO’s last-mile services to deliver heavier consumer goods.