A third quarter update from the smaller carrier Yellow Corp. reflected the network restructuring the company had undertaken. During the first two months of the third quarter, tonnage declined by mid-teens percent year-over-year (y/y), well ahead of mixed peers.
Yellow (NASDAQ: SCREAM) is currently undergoing a network overhaul in which it has consolidated all of its individual LTL brands onto a single technology platform. It is also streamlining some terminals to reduce redundancy, improve asset utilization and lower cost structure. Transformation and profitability initiatives, which include shedding less profitable freight, impacted volumes.
Tonnage was down 17.2% y/y in July and 15.7% in August, the carrier said Monday after the market closed. The year-on-year decline was in line with the 16.4% drop recorded by the carrier in the second quarter, but improved from February’s peak of 27%. In a two-year combined comparison, tonnage fell by 23% in July and by 24% in August.
Yellow’s improved cargo selection led to improved yields over the period, up 23.8% y/y in July and 19.9% in August. Higher diesel prices have boosted profitability for LTL carriers, but the retail price per gallon is down an average of about 5% from the second quarter and down 13% from its peak in June.
“The network transformation is one of the final steps on our journey to One Yellow, and the expected benefits include improved customer service, greater efficiency, cost savings and additional network capacity,” CEO Darren Hawkins said in a press release.
He said the company is staying informed the first stage of integration at the YRC Freight and Reddaway terminals, with implementation scheduled for Sunday.
Improved pricing and early restructuring wins showed in the carrier’s second-quarter results. During this period, he recorded his best performance in 15 yearsshowing a 93% duty ratio.
Updates from other LTL carriers for the third quarter showed softening trends from the peak of the cycle.
Last Wednesday, Old Dominion Freight Line (NASDAQ: ODFL) is reported modest y/y decline in shipments and tonnage but productivity continued to expand at a high level. Saya (NASDAQ: SAIA) volume trends so far in the quarter have also been muted as a slight decline in shipments has been offset by higher shipment weights, resulting in minimal tonnage gains.
“We continue to see rational and disciplined pricing in the market,” CFO Dan Olivier commented on Thursday’s investor conference call. “Given this and all existing capacity requirements, we believe we can continue to achieve consistent price growth, even if the year-over-year comparison continues to decline … whether or not there is a recessionary environment. on the horizon or not.”
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