News / US cargo owners cool on active logistics as markets slow

Photo: © Billy Blume | Dreamstime.com

US cargo owners appear to have lost their appetite for investing in the active management of logistics operations.

Back in 2021, with congested networks and transport capacity across all modes woefully lacking demand, cargo owners came to the conclusion that they had to take steps to secure capacity, which culminated in the likes of Walmart and Target chartering containerships.

The subsequent rapid descent of most segments to overcapacity, and collapsing rates, has forced companies to re-evaluate this strategy and scale back.

When it launched Quiet Platforms in 2022, shipper American Eagle Outfitters (AEO) became one of the poster children of a more proactive stance to secure and control capacity. Last week, it announced its results for the quarter ended 3 February showing $98.3m in impairment and restructuring charges associated with the struggling platform for sharing dedicated trucking capacity with other retailers.

AEO had acquired two logistics providers, AirTerra and Quiet Logistics, in autumn 2021 to set up Quiet Platforms to pool the trucking contracts of the fashion brand and other retailers and brands, and deliver parcels faster and cheaper than traditional fulfilment channels.

This harnessed about 40 carriers, ranging in size, and AEO chairman and CEO Jay Schottenstein claimed the platform would enable AEO and other retailers to compete “against the Amazons, the Targets and the Walmarts in the future”.

The mood had changed early last year. At the earnings presentation for the last quarter of fiscal 2022, management announced that Quiet Platforms had grown nearly 40%, but margins had been below expectations.

EVP Shekar Natarajan, head of Quiet Platforms and the driving force behind its creation, left the company in April. A year later the picture does not look much better.

AEO does not break down Quiet Platforms results, which are reported on the balance sheet under the “Other” category, which shows a $36.1m operating loss for Q4 23.

For the quarter AEO booked charges against Quiet Platforms adding up to $98.3m: $40.5m for intangible asset impairment; $39.6m for goodwill impairment; $13.9m for long-term asset impairment (largely related to discarded technology); and $4.3m for employee severance.

But AEO is not walking away from Quiet Platforms altogether. Management said it intended to leverage the platform as a “regionalised fulfilment centre network” to locate inventory closer to stores and customers to aid faster delivery and lower costs.

And cost appears to have prompted Walmart to hand over control of its intermodal assets to JB Hunt. The retailer is selling these assets to the intermodal marketing and 3PL firm under a long-term deal that raises Walmart’s volume and capacity commitments to its partner.

The pair did not disclose details on the number of assets sold or length of contract, nor did the retailer elaborate on its reasons for the move.

Fernando Cortes, SVP of transportation, merely said: “This agreement will strengthen our commitment to delivering goods at an everyday low cost to our customers and members.”

The lure of owning and controlling assets has visibly weakened in a slow market that has driven down rates while costs are high.