J.B. Hunt Transport Inc. is buying another delivery firm to grow its "final mile" division and accommodate shoppers who have come to expect deliveries of bulky sofas or smart TVs right to their doorsteps.
The Lowell-based freight and logistics company announced Wednesday that it has agreed to pay $100 million for Cory 1st Choice Home Delivery, a family-owned, New Jersey-based firm that handles large, retail items. Cory has 14 warehouses and uses more than 1,000 independent contractors across the nation.
The agreement marks J.B. Hunt's second purchase in the growing e-commerce home delivery space in the past two years. In 2017, Hunt bought Houston-based Special Logistics Dedicated LLC for $136 million.
In remarks to reporters, J.B. Hunt President and Chief Executive Officer John Roberts said the Cory deal will further expand its "final mile delivery capabilities of 'big and bulky' products."
The term "final mile" refers to the end of a delivery process to the destination specified by a customer. The length can be a few blocks or a few towns. The last stretch for years has been a challenge for freight firms but has grown with the popularity of online shopping.
According to a 2019 study by InfoSys, an India-based think tank, it "can be the most expensive and the most important part of the supply chain process."
Cory, founded in 1934, relies on a network of independent carriers, contractors and drivers to complete more than 2 million annual deliveries. Unlike long-haulers that spend hours on highways in big rigs, last-mile drivers navigate through neighborhoods to deliver orders. Some firms, like Cory's, offer "room of choice" and "white glove" services that repair any blemishes and blanket-wrap the product during delivery.
Nick Hobbs, executive vice president of J.B. Hunt and president of its Dedicated Contract Services unit, said in remarks to reporters that the home delivery firm's "exceptional reputation for quality service complements our mission to be the best final mile provider in North America."
With the Cory acquisition, Hunt said its final-mile division will grow to include 100 locations and more than 3.1 million square feet of warehouse space and facilities. So far the company has posted $250 million in total revenue for the final-mile segment in a 2017 annual report published last March. Roberts and James Thompson, chairman of the company board of directors, said in the report that they "believe the need for services in the final-mile category ... will accelerate based on the current retail and e-commerce data trends."
Most recently, Hunt posted a $23 million increase in segment revenue for the three months ending September 30 compared with the quarter a year before.
Brad Delco, a transportation analyst at Stephens Inc., echoed Roberts' comments, viewing the Cory deal as a way for J.B. Hunt to "build out" its e-commerce delivery operations to accommodate shifting consumer habits.
"Supply chains are evolving," Delco said. "People are getting more comfortable ordering items online. And they're not just smaller items; they're larger items. And there's really not networks that do this. ... I'm thinking of the parcel guys."
As consumer expectations rise, so do the delivery fees. United Parcel Service Inc. raised its fees last year to $650 for oversized parcels to discourage shippers from sending items over 150 pounds through its system. Rival FedEx followed suit a few months later, raising its fees for oversized or overweight items.
Meanwhile, trucking firms Werner, Schneider International and XPO are also racing to build out their final-mile, heavy-goods operations, said Matthew Young, an industry analyst at Morningstar.
"This is not a short-term trend," Young said. "Heavy-goods delivery is here to stay with e-commerce growth, and it will likely settle among several large carriers going forward."
A notice of the deal had not been filed with the U.S. Securities and Exchange Commission as of Wednesday afternoon. The Wall Street Journal reported the deal includes most of the assets of Joseph Cory Warehouses Inc. and its affiliates. Goldman Sachs & Co. LLC acted as financial adviser, and Mitchell Williams served as legal adviser to J.B. Hunt.
Shares of J.B. Hunt rose $1.09, or 1 percent, to close Wednesday at $96.97.
Business on 01/10/2019