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"We are confident that we’re going to be winning new business in a healthy macroeconomic environment," Kelleher said. (GXO Logistics)

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Newly minted GXO Logistics CEO Patrick Kelleher sees opportunity for his company’s core business despite an enduring freight recession that has dragged on longer than many fleets expected.

“The overall economic market may not be growing, but the contract logistics industry is, and outsourcing is,” Kelleher said during an interview with Transport Topics. “When we look at the contract logistics industry, roughly 20% of supply chain spend is outsourced. So, our total addressable market is large. It is largely under-penetrated, and it is serviced by a fragmented set of providers.”

Kelleher replaced Malcolm Wilson, the company’s first CEO, after Wilson retired in August. GXO was spun off from then-XPO Logistics into a separate pure-play contract logistics company in August 2021.

Kelleher believes GXO is well-positioned to manage through persistent macroeconomic headwinds, noting that his company’s pure-play contract logistics focus keeps it poised to manage fluctuations in the overall freight market.

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Kelleher. (GXO Logistics)

“We signed over $280 million worth of business in the third quarter,” he said. “As the overall macroeconomic environment improves, our volume associated with the business that we’ve won will grow as well. We are confident that we’re going to be winning new business in a healthy macroeconomic environment.”

When that macroeconomic rebound arrives, Kelleher believes GXO could enjoy the double benefit of volume growth from existing customers along with organic growth from new customers.

Growth Opportunities

In terms of new business, Kelleher said GXO is exploring the areas of aerospace and defense, as well as expanding globally.

“We have a number of initiatives underway to drive growth in aerospace and defense, in all three regions that we’re operating — North America, U.K. and Europe,” Kelleher said. “That is an area that we’re going to be investing in. And currently I’m really excited about opportunities in the industrial space — particularly the capabilities and business that we have around data centers.”

Overseas, England’s NHS Supply Chain in May announced that it had selected GXO as its new logistics partner. The company provides procurement and logistics services for the government-operated National Health Service. GXO said the decade-long, $2.5 billion contract significantly expands its presence in health care logistics.

“With the NHS win in the U.K., we’re seeing a lot of pipeline activity around life sciences, an area in which we’re investing,” Kelleher said. “I’m excited about that for the opportunities that those verticals present. I’m also excited in that those tend to be independent in terms of their economic performance to our retail, omnichannel and consumer products facing businesses, which I think provides a nice portfolio blend of industry vertical for us going forward.”

The Greenwich, Conn.-based company in the third quarter posted net income of $60 million, or 51 cents a diluted share, for the three months ending Sept. 30. That compared with $35 million, 28 cents, during the previous year. Total revenue increased 8% to $3.4 billion from $3.16 billion.

“The team has done a phenomenal job over the last four years,” Kelleher said of the company’s initial years as an independent. “We participate across a number of industry market verticals. We have industry-specific solutions for those verticals, and as we usher in a new era of growth.”

He added, “It really is about capitalizing on that foundation that has been built, and accelerating our efforts in taking solutions to the marketplace, and growing the business organically as we look at the next couple years.”

GXO ranks No. 3 on the TT Top 100 list of the largest logistics companies in North America.