Leading LTLs cutting headcount, terminals as retail demand slackens

The retrenchment of the $46 billion less-than-truckload (LTL) industry is beginning as the industry enters its slowest freight demand part of the year.

FedEx Freight, the LTL unit of FedEx Corp. and the nation’s largest LTL carrier, said it is laying off an undetermined number of drivers starting in early December. The furloughs are scheduled to last approximately 90 days. It is describing the layoffs as “voluntary.”

Yellow Transportation, which controls about 10% of the LTL market, is selling a handful of its 290 terminals as part of its long-term strategy to implement a network efficiency plan that formerly consisted of long-haul Yellow Freight and regional carriers Holland, New Penn and Reddaway. As a result, it expects to close or sell approximately 28 terminals, officials said.

Now, Yellow reports as a single carrier. The combination of long-haul and regional freight networks in the West already has been completed, optimizing more than 4,600 ZIP code pairs and affecting 89 terminals. Similar combinations in the Central States and Eastern coverage areas are expected to be completed by early 2023.

“Throughout 2022, we have consistently kept our focus on improving the quality and profitability of the freight moving through our network and that continues to be our plan as we execute the final steps in the transformation to One Yellow,” Yellow CEO Darren Hawkins said on a recent conference call with analysts.

“We went into the transition with a straightforward set of goals that would define success,” Hawkins added. “First, we stood the terminals up to begin operating as a super regional network.”

Still, Yellow is transforming itself while shipments per day are dropping. Analysts are citing bloated inventory levels in the retail sector as the cause. Retail makes up around half of a typical LTL carrier’s load mix. More than half of Yellow’s 10 largest customers are in retail, Hawkins explained.

“Certainly, in October, we saw a slackening of demand in our retail channel,” Hawkins said. “Even though like most LTL carriers, a larger portion of our revenue is in the industrial channel and it held up. But some of our largest customers are actually in the retail channel and we saw slackening demand in the retail channel.”

At Yellow, sequential LTL tons per day trends compared to the prior year were as follows: July down 17.2% year over year, August down 15.7% and September down 15.8%.

On a preliminary basis, October LTL centers per workday was down approximately 24% compared to last year, according to Yellow. On a sequential basis from September to October, its LTL tonnage per day was down between 6% and 7% compared to its historical trend of roughly 4%.

“We are not giving up any geography or service area,” Hawkins emphasized. “We are basically giving up 6% of our dollars.”

That’s because in those 28 facilities that are closing due to restructuring, Yellow is eliminating 1,200 terminal doors, which is 6% of its doors throughout the system

Saia could delay plans to open 10 to 15 new terminals next year if the economy worsens, President and CEO Fritz Holzgrefe said during a Q3 earnings call.

The LTL carrier would pull back on its expansion plan in the face of shifting market demands or a “significant economic contraction,” Holzgrefe said.

“What we see is a long-term opportunity for us to continue to improve our service map,” the CEO said. “And if we think there are opportunities for us to do that, we will. If the market isn’t accepting of that, I think we back off or we slow down or delay.”

Saia, the nation’s ninth-largest LTL carrier with $2.3 billion revenue last year (up 25.6% from 2021 revenue), is done expanding for a while. After growing its network to 187 facilities this year, including opening five in new markets in the past quarter, it’s in a holding pattern right now, according to Holzgrefe.

“We have the ability to slow, delay, maybe even in some cases accelerate it, depending on the environment,” the CEO said during the earnings call. “Three months or a couple of quarters into next year ... we might say, let’s pause.”

Saia still expects capital expenditures to approach $500 million this year. With a healthy pipeline of real estate opportunities, next year’s spending levels should look similar, Executive Vice President and CFO Doug Col said recently on a call with analysts.

“You might see us act on some real estate activities, be it land or terminals, and not necessarily have to open them,” Col said. “It wouldn’t be a bad thing if we end up stockpiling a few things. I don’t think we’re going to be shy about making good investments even if we don’t open them.”