XPO Logistics' top customer pulls back, Amazon suspected

LOS ANGELES (Reuters) - XPO Logistics Inc shares sank more than 14 percent on Friday after it said its biggest customer, believed to be, slashed its business with the warehousing and last-mile delivery provider by two-thirds.

XPO shares fell $8.53 to $51.02 a day after the company missed fourth-quarter profit targets and warned that it could lose $600 million in revenue in 2019 due to a reduction in business from its biggest customer, which XPO did not name.

Current and former XPO employees as well as industry insiders told Reuters that the customer is Amazon.

“We believe the shipper that is paring down its parcel injection, brokerage, last mile, and logistics activity with XPO is Amazon,” J.P. Morgan analyst Brian Ossenbeck said.

Amazon, which contributed about $900 million in XPO revenue last year, declined comment.

XPO is closing facilities in Aberdeen, Maryland; Edgerton, Kansas; and Rialto, California. An XPO employee told Reuters Amazon was the customer at all three of those facilities.

A former XPO employee also told Reuters that the 571,000 square-foot warehouse in Aberdeen handled Amazon work.

When XPO opened its Edgerton, Kansas facility in 2016, a broker told the Kansas City Business Journal the company’s client for the 500,000 square-foot facility was Amazon.

XPO facility closures on the East Coast and in the Midwest received heavy media coverage. “That was with our largest customer,” XPO Chief Executive Bradley Jacobs said on a conference call with analysts.

XPO disclosed plans to close its Rialto facility with California’s Employment Development Department in late January.

Amazon is building out its shipping capabilities. That's putting pressure on last-mile delivery companies such as FedEx Corp and United Parcel Service Inc UPS.N, as well as truckers who move products on highways and between distribution centers.

The e-commerce giant also is edging into the heavy and bulky warehousing and delivery category that is XPO’s specialty.

The planning board for the town of Schodack, New York, in July approved Amazon’s plan to build a 1,000,000-square-foot warehouse and distribution center “designed to handle heavy, bulky items - such as TVs, kayaks and canoes,” according to WNYT.

Shares in FedEx, which is testing big and bulky deliveries that would compete with XPO, were down 2.9 percent in late-afternoon trading. UPS shares were off nearly 1.3 percent.

XPO shares closed at $59.55 on Thursday. In September, they traded at more than twice that price.

Reporting by Lisa Baertlein in Los Angeles; Editing by Phil Berlowitz and James Dalgleish