Home Depot Rumoured to be talking to XPO

Rumours are swirling that the US Furnishing and DIY retailer Home Depot is planning to buy XPO Logistics. The reports assert that XPO and Home Depot have been talking to each other for several weeks about the suggested acquisition. Neither company is commenting on the suggestion and the source of the rumour is unclear. However, the rumours appear to be believed by someone as the share price of XPO Logistics has climbed substantially over recent weeks.

The suggested logic of the deal would be to give Home Depot a logistics capability across the US to facilitate ‘last mile’ delivery of the oversized goods such as furniture. Home Depot is largely a ‘DIY’ store, rather than a furniture retailer with a high proportion of its goods sold capable of being handled through conventional last mile channels, although its size and exposure to interior decorating inevitably means that volumes of larger dimensioned goods is substantial. Unsurprisingly, Home Depot is expanding into internet retailing, which in turn is broadening its market exposure.

Home Depot, which in 2016 had a revenue of $94.6bn, has a large network of around 90 distribution centres across the US, although as a conventional retailer these are not fulfilment centres.

Buying XPO Logistics would give Home Depot considerable fulfilment centre resources as well as the transport element of last-mile delivery. However, there is a lot more to XPO than just US based last-mile, although admittedly this appears to be the most dynamic of part of its business at present. If Home Depot were to buy XPO Logistics much of the non-retail aspects of XPO would presumably be sold-off. Indeed, the extent of XPO’s non-retail business might raise a question mark of the concept of a US retailer buying the business at all.

It is hard to ignore such reports, however it is also difficult to know how much weight to give them. What such speculation might tell us is that the impact that Amazon’s investment in logistics infrastructure is changing the structure of retailing generally. There is a concern by larger retailers that they will lose competitiveness against Amazon if they do not gain access to a logistics capability with the economies of scale that Amazon has created for itself. This is certainly leading some to consider radical solutions.

Source: Transport Intelligence, January 2, 2017

Author: Thomas Cullen


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