Coyote, Knight-Swift Tighten Belts, Lay Off Workers
Coyote Logistics and Knight-Swift make strategic layoffs amidst industry challenges. What does that mean for the market?
The $800 billion trucking industry has been facing turbulence for a while now, and the signs are visible in the actions of some significant players.
Chicago-based Coyote Logistics, the No. 3 freight brokerage firm with a whopping $5.2 billion in revenue in 2023, recently confirmed layoffs. The move is aimed at streamlining for "long-term stability," with an overall 7% decrease in staff over the past two years.
- Coyote's Strategy: Aiming for agility and efficiency.
- Earlier Layoffs: About 200 employees earlier this year.
The larger picture reveals a pattern. After hiring aggressively post-coronavirus shutdowns, a market crash in summer 2022 forced many in the industry, including giants like Flexport and C.H. Robinson, to let go of staff.
Parallelly, Knight-Swift Transportation, one of America's largest trucking companies, is in a similar boat. Responding to disappointing financial figures, Knight-Swift conducted a series of layoffs last week, primarily targeting support roles – HR, IT, and others.
- Knight-Swift's Q2: Missed earnings expectations and slashed its full-year guidance by 36%.
- Executive Steps: CEO and CFO voluntarily reduced their base salaries by 20% for the remainder of the year, signaling earnest cost-cutting efforts.
While the core operations of Knight-Swift, such as drivers and customer-facing roles, remain unaffected, the cost-cutting measures, similar to Coyote's, highlight the industry's pressing need to adapt amidst challenges.
Rocket Shipping's CEO, Gabe Pankonin suggests that these abrupt changes, seemingly paradoxical, might actually be tied to a broader trend in the industry's financial landscape:
- Changing Investment Landscape: The past decade saw companies "buying" market share and running at losses to grow revenues. They'd burn cash month over month to attain significant figures and even build technology solutions that weren't necessarily in demand, all to position themselves favorably for sales or acquisitions.
- Shift in Priorities: The game has changed. Investors now seek profitability over mere growth. Companies that started lean, maintained a path to profitability from the outset, and can showcase consistent profitability are now prime targets for investors.
Panokin says that profit-focused startups have the space to emerge as industry winners amid economic shifts and competition.