On Jan. 3, 2023, the transportation world awoke to the news that Bob Biesterfeld, president and CEO of freight broker and 3PL giant C.H. Robinson Worldwide Inc., had resigned his posts. The corporate’s stock, which had already dropped greater than 15% from around $120 a share in August, registered little immediate response to Biesterfeld’s abrupt departure.
Analysts, nonetheless, were less forgiving, raising concerns a few leadership vacuum and the corporate’s general direction. Almost to an individual, they began lowering their 12-month price targets, with many dropping their estimates into the double-digit range.
The following 12 months proved those analysts right. In a rough trucking market, and with no clarity on a recovery plan, C.H. Robinson (NASDAQ: CHRW) shares followed the trail of least resistance, which was down. Shares descended into the high $70s in the autumn before drifting up into the mid to high $80s, the extent it trades at today. It took six months for the board and an executive search committee to choose Biesterfeld’s successor. When it got here, the brand new leader, an outsider with no C-suite experience and a comparatively modest transportation background, was not who many had expected.
A 12 months and every week since Biesterfeld stepped down, the story has largely stayed the identical. Robinson’s North American truckload volumes, the core business of the corporate, proceed to say no. C.H. Robinson’s freight forwarding business, whose performance was so strong through the pandemic that the corporate considered selling it at a premium, has fallen back and isn’t any longer on the block. Questions have been raised concerning the cost-effectiveness of its proprietary technology, Navisphere, especially when less-expensive and equally functional off-the-shelf alternatives exist.
The corporate’s costs have risen and remain mis-aligned with volume trends. Margin pressure continues almost unabated. Analysts are hard-pressed to discover trends that illustrate short to intermediate-term improvement, especially with demand and pricing expected to stay weak no less than through the primary half of the 12 months. On the anniversary of Biesterfeld’s departure, Ken Hoexter of Bank of America/Merrill Lynch published a note setting a 12-month price goal of $80 a share, greater than $7 a share below where shares traded on Tuesday
The query is whether or not C.H. Robinson’s problems are as a consequence of the punishing cyclicality of the present trucking market, or if the corporate faces a secular problem separate from industry cycles, namely if it has lost its relevance. There are roughly 18,000 brokers within the U.S., and C.H. Robinson’s volumes could likely be absorbed without much of a hiccup should the corporate slide into some type of long-term abyss.
All of that is to the chagrin of C.H. Robinson’s long-term shareholders, who’ve relatively little to point out for his or her investment over the past 15 years. On Jan. 5, 2009, as financial markets were mired within the depths of the Global Financial Crisis, the corporate’s shares closed at $49.29 per share. An expected close on Tuesday of barely below $87 a share signifies that shares have gained, on a compounded basis, 3.88% a 12 months, a dismal performance given how much the shares of competitors and the foremost equity indices have appreciated over that point. C.H. Robinson’s shares currently pay a dividend of two.79%
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Mollifying aggrieved shareholders is just one in every of the problems on the plate of Dave Bozeman, who became president and CEO of the corporate at the tip of June. Bozeman’s hiring got here despite concerns that five years serving as vp of Amazon Transportation Services didn’t qualify him to run a $15 billion global enterprise, especially with Jim Barber on C.H. Robinson’s board. Barber, who expressed interest in being CEO, had served as COO of UPS Inc. (NYSE: UPS), and had run UPS’ vast international business.
Bozeman has begun to remake the C-suite, starting with a brand new CFO to exchange Mike Zechmeister, who will retire by the tip of May if a successor hasn’t been named by then. He can also be pushing to enhance productivity at the corporate’s North American Surface Transportation unit, by far its biggest operation, by 15% in 2023 and by 50% over the subsequent three years. To do this, Bozeman has said he’ll embrace lean process strategies, unusual amongst transport firms. Bozeman has created an office designed to support the corporate’s strategic initiatives to be run by Jim Reutlinger, a lean process expert.
In a press release to FreightWaves, C.H. Robinson acknowledged that it “could have done a greater job managing costs” through the pandemic-driven market upcycle, when it brought on plenty of people and boosted its IT spending only to be saddled with excess expenses through the subsequent downturn. It added within the statement that the “strategies and productivity improvements currently being implemented, combined with our expert people and robust customer value proposition, are putting the corporate in a greater and more competitive position.”
A truckload of challenges
Bozeman had nothing to do with C.H. Robinson’s subpar performance over the past decade in a half. For that, there are any variety of explanations. Founded in 1905, Robinson spent 92 years as a personal company before going public in mid-1997. Not every deeply ingrained privately held culture is in a position to optimally adapt to the unfamiliar rigors of the general public markets.
“I’ve at all times contended that the worst thing they might have done was to go public,” said Jason H. Seidl, analyst at investment firm Cowen & Co.
C.H. Robinson’s first 10 or so years as a public firm were bountiful, mainly since it remained the go-to broker in a world where many carriers didn’t have in-house brokerage businesses. C.H. Robinson’s world began to vary after asset-based carriers, realizing that the corporate was using their assets to call on their customers, and reaping big margins in the method, began to develop their very own brokerage arms and in the method undercut C.H. Robinson on pricing. in line with Seidl,
A source acquainted with C.H. Robinson said the proliferation of asset-based brokerage divisions was a part of the issue, but removed from all of it. Pure-play truckload brokerages comparable to TQL, Arrive Logistics and Echo Global Logistics, have been around for 10 years or more and have managed to compete with C.H. Robinson and grow their truckload volumes over the past five years while Robinson’s traffic has stagnated or declined, the source said.
The rivals’ push into C.H. Robinson’s core business begs the toughest query of all, the source said. “When you’re not a truckload broker, then what are you doing,” the source said.
A part of the blame, the source said, lies with board governance. 4 of the corporate’s 12 board members have served for 10 years or more, and must take some extent of responsibility for the corporate’s underperformance, the source said. Two board members were added in 2022 on the request of Ancora, which owns 2% of Robinson’s stock and has been pushing for changes inside the enterprise.
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