News / Pitney Bowes bows out of global e-commerce with sale of loss-making GEC

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Parcel giant Pitney Bowes (PB) is making a fast exit from e-commerce.

Hours before tabling its Q2 results yesterday, the global shipping and mailing company that provides technology, logistics and financial services to over 90% of the Fortune 500, announced it had sold a controlling interest in its Global Ecommerce (GEC) segment to Hilco Commercial Industrial, for the purpose of winding down the business.

Hilco immediately placed two units of GEC into Chapter 11 bankruptcy protection to start a liquidation expected to be completed by Q1 next year.

The writing has been on the wall. On 27 July, PB sold its e-commerce fulfilment business to Stord, a logistics start-up for an undisclosed sum. Stord had boosted its footprint on the e-commerce logistics scene four months earlier with the takeover of ProPack Logistics.

At the time, PB emphasised it was still conducting a review of the GEC business, but the move signalled the beginning of the end.

“The sale is the exit from e-commerce fulfilment,” commented Satish Jindel, president of SJ Consulting. “I imagine it was a fire sale.”

The fate of GEC had been in doubt since May, when PB announced a strategic review of its activities, with GEC ma particular focal point.

The company’s leadership had come in for strong criticism from activist shareholder Hestia Capital, which led to the election of four nominees to the PB board. CEO Jason Dies subsequently resigned and was replaced with interim CEO Lance Rosenzweig.

In July, prior to the sale of PB’s fulfilment operation, GEC president Greg Zegras retired. No replacement was named.

In the earnings call following the presentation of PB’s Q2 results, Mr Rosenzweig said GEC had been “struggling to achieve profitability over the past several years in the face of macroeconomic and industry headwinds”, and that the strategic review concluded that an “orderly and expeditious wind-down” would be the best solution.

And Mr Jindel believes the criticism from Hestia Capital was justified. He said: “They got into businesses they didn’t have the right infrastructure for.”

PB’s second quarter showed a net loss of $25m, an improvement on the $142m deficit a year earlier. Revenues were up 2%, to $793m.

The GEC segment generated $326m in revenues, a 7% improvement year on year, with adjusted Ebitda at a deficit of $17m, up from a $23m loss 12 months earlier. In the fiscal year ended 31 December, GEC showed a loss of $136m, while e-commerce-related revenues reached $1.35bn.

Mr Rosenzweig told investors PB would remain “an industry leader in mailing and shipping”. Shipping-related revenue would account for about 16% of overall turnover and set to rise.

E-commerce is a field PB is happy to walk away from – it will be not be the only one among the players that have concentrated on the middle mile, Mr Jindel commented.