Dive Brief:
- Old Dominion Freight Line will continue its multi-year service center network expansion "regardless of the short-term macroeconomic outlook," CEO Greg Gantt said during a Q2 earnings call.
- Despite flattening LTL tonnage, the carrier expects to open multiple new facilities during the second half of this year, Gantt told investors. Tonnage increased 0.7% in the quarter on a sequential basis, Senior Vice President and CFO Adam Satterfield said.
- New sites and expansion projects should increase Old Dominion’s excess capacity from its current levels of 15% to 20% toward its longer term target of 25%.
Dive Insight:
While Old Dominion has slowed at least one major investment — its yearslong hiring spree — as LTL demand dipped last quarter, growing LTL service center capacity “can take a significant amount of time,” Gantt said.
The company relies on its idle capacity to earn freight opportunities when markets tighten, as they have in the past few years, Satterfield said.
“As quickly as demand can change, you can't put service center capacity in place quick enough,” Satterfield said. “And it takes doors in an LTL network to really process freight and be able to grow. Certainly, you’ve got to have equipment and people, as well, but the doors are really what takes the most time to get in place.”
Old Dominion now has 260 service centers across the country. The company has added six distribution centers since May, when Gantt told investors on a Q1 call the company might exceed its $300 million budget for service network expansion for this year.
Old Dominion is on pace to hit $1 billion in revenue growth for the second straight year, Gantt noted on the Q2 call.
“We simply could not have achieved these types of numbers without the consistent investment in our service center capacity,” he said.
