XPO’s Last-Mile Logistics business
XPO Logistics’ (XPO) Last-Mile Logistics business utilizes the services of independent contractors to provide transportation (IYT) and end delivery to businesses and consumers’ homes. The company provides these last-mile logistics services through a network of last-mile hubs throughout North America.
By the end of 2017, the company operated 55 XPO last-mile hubs in North America and expects to grow this network to 85 hubs in 2018. These hubs are expected to cover ~90.0% of the population in the United States.
XPO expects that the growth in these last-mile hubs could reduce transit times of packages for its customers. The carrier’s Last-Mile Logistics business specializes in the delivery of heavy goods including furniture, appliances, and large electronics.
Last-Mile Logistics’ key growth drivers
The key growth driver for XPO’s Last-Mile Logistics segment has been business from brick-and-mortar retailers and e-commerce retailers in the United States. XPO notes that it serves almost all of the top 30 retailers and e-tailers in the US.
Home Depot (HD) and Amazon (AMZN) also use XPO’s last-mile services to deliver heavier consumer goods. The rise in e-commerce has fueled the growth in revenues for XPO’s Last-Mile Logistics business, resulting in a 21.0% rise in its year-over-year revenues in fiscal 4Q17.
In February 2018, XPO entered Europe with its last-mile operations. The company rolled out its Last-Mile Logistics business in the United Kingdom, the Netherlands, Spain, France, and Ireland.
e-Commerce and XPO’s peers
The growth in e-commerce is also fueling the rise in revenues for XPO’s peers, which include FedEx (FDX) and United Parcel Service (UPS). In the past four quarters, including fiscal 3Q18, FedEx’s average growth in revenues has been 13.7%, which reflects the strength in FedEx’s top line. United Parcel Service saw its revenues rise 8.2% in fiscal 2017.