Dive Brief:
- Werner Enterprises is restructuring its one-way truckload business to prioritize expedited routes and specialized verticals, aiming to increase long-term profitability, according to its Q4 earnings report.
- The move, which began in Q4, included a reduction of 230 trucks in its one-way fleet and resulted in a $44.2 million charge during the quarter.
- Benefits from the changes are expected to begin appearing in Q2 results, CFO Chris Wikoff said during the company’s Feb. 5 earnings call.
Dive Insight:
Werner is opting to reshape its one-way truckload operations rather than wait for broader market conditions to improve, CEO Derek Leathers said, describing the strategy as a move toward a “leaner, more selective” business model.
By retooling its one-way truckload segment, Werner said it can devote more resources to its higher margin dedicated business. Leathers said over a 10-year period, its dedicated business has outperformed one-way on average about eight out of those 10 years.
The company is increasing its emphasis on expedited cross-border Mexico routes and expanding into higher-margin verticals like pharmaceuticals and technology, while moving away from regional and short-haul truckload freight.
During the earnings call, executives noted that the evolving freight mix created near-term pressure on revenue per total mile, even as it positions the business for profitability in the future.
However, Leathers argued that although its one-way fleet is smaller following the restructuring, the sharper focus on network fit and route density will improve efficiency. Werner expects fewer empty miles and more miles per truck, which in turn will drive better service levels.
“There’s a lot in the soup, but it's been something that was considered very carefully and we're excited about what we're seeing from early returns,” he said during the earnings call. “But for it to flow through and show through to the bottom line, as Chris indicated, we view that inflection point being in Q2.”
The trucking firm expects one-way truckload revenue in the first half of the year to be flat to up 3%.
The restructuring comes amid a difficult quarter for Werner’s truckload transportation services segment. In Q4, the segment reported an operating loss of $32.9 million, compared to an operating income of $11.7 million a year earlier. The division’s operating margin also declined to negative 6.4%, driven largely by weaker one-way performance.
