- Business for Werner Enterprises has increasingly shifted toward transporting retail and consumer products as the carrier has sought out growing companies providing consumer essentials.
- Retail and consumer goods made up 49% of its top 50 customers over five years ago, but that has since grown, with those industry groups making up 60% of the mix as of 2022.
- That comes as Werner has anticipated how to best perform during downcycles. “Over the last several years, we carefully designed and prepared our business to outperform in a slowing economy,” CEO, Chairman and President Derek Leathers noted last month on a Q4 earnings call.
Key customers for Werner take on greater role
Consumers are becoming more value-conscious in their spending, Leathers said, and its largest customer has remained Dollar General.
Accordingly, one of Werner’s strategies involves a focus on transporting consumer nondurable products, which the carrier notes are generally more stable during a slowdown in the economy.
“There are still people rightsizing their inventories,” Leathers said on the earnings call, adding that the carrier is not banking on “some sudden rebound in the economy.”
Firms such as Kohl's, Macy's and Overstock, have worked to avoid excess inventory, which has dampened demand for trucking services.
Carriers have noted challenges from Q4 and a mix of outlooks for the first half of 2023. Knight-Swift Transportation Holdings remarked how freight demand could recover in the second half, while Old Dominion Freight Line expressed optimism for demand in Q2.
XPO noted that it remains to be seen what kind of demand will happen in March.
“We are cautiously optimistic about the demand environment,” CEO Mario Harik said on the earnings call last month. “So when we look at the back half of the quarter, based on what we're seeing in our results today, we are seeing a pickup and more strength from a volume perspective.”
Werner believes the back half of the year will help the move back “to a world of inventory replenishment, peak freight movements, et cetera,” Leathers said, “all of which will support our portfolio well.”