By Paul Page
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Amazon.com Inc. isn't letting rising shipping costs get in the
way of profits. The e-commerce giant reported a record $857 million
net profit in the second quarter on a 31% gain in revenue, the
WSJ's Greg Bensinger reports, and suggested in its outlook that the
company sees no slowdown in the online sales juggernaut that has
reshaped the retail world. The strong quarter, boosted by strong
results in the Amazon Web Services cloud computing division, came
even as shipping costs soared 44%. That marked an acceleration of
the 42% jump in shipping costs Amazon saw in the first three months
of the year, but the growth underscored Amazon's rapid gains in the
consumer marketplace rather than an unwieldy grip on distribution
expenses. In fact, Amazon's operating profit nearly tripled, and
the 28% jump in inventory on the balance sheet from a year ago was
behind the growth in sales. The company may see its costs rise as
it takes over more of its own delivery, but the latest financial
report suggests Amazon is expanding its reach into retail with a
strong grip on logistics efficiency.
Freight can wait, as far as the rail industry's top regulator is
concerned. The Surface Transportation Board is dropping a proposal
backed by the freight railroads that would have given the cargo
haulers leeway in deciding whether Amtrak passenger trains get
priority on tracks, the WSJ's Laura Stevens writes. The STB
proposal would have resolved a longstanding and sometimes very
heated dispute between the passenger railroad and the freight
carriers over the legal requirement that the cargo carriers give
passenger trains "preference" on the tracks. The freight operators
say that's not an absolute right for passenger trains, merely a
call to weigh the balance of interests. The issue is sidetracked
for now, but it may not be gone. The board may still address the
question if individual cases bring it up, and STB members want to
face the fallout again.
DP World is expanding in North America, even if the Dubai-based
shipping terminal operator can't get into the U.S. The company
struck a deal to operate a container terminal in Saint John, New
Brunswick, the WSJ's David George-Cosh reports, a move that will
allow DP World to compete with U.S. ports along the eastern
seaboard while boosting its operations in Canada. It's DP World's
fourth site in Canada, and gives the operator a beachhead to offer
"an alternative gateway opportunity" to shippers and shipping lines
pushing goods through the East Coast. The 30-year pact starts in
January and comes as the port is looking to nearly triple its
container-handling capacity. DP World remains outside the U.S.
market, after backing down from acquiring five U.S. terminals in
2006 amid a politically-charged backlash from lawmakers in
Congress.
E-COMMERCE
Traditional retailers are trying to use their storefronts to
their advantage as they compete with burgeoning e-commerce sales,
but the strategy has a critical flaw. In a Guest Voices commentary,
Yossi Sheffi of the Massachusetts Institute of Technology's Center
for Transportation and Logistics writes that the brick-and-mortar
retailers are essentially fighting with their own cost-saving
efforts at stores with their wide-ranging omnichannel solutions.
The efforts are aimed at giving consumers their goods when and
where they want, and essentially using stores as distribution
centers for "click-and-collect" and "click-and-deliver" operations.
But the new tasks being added at stores are running counter to
bigger drivers in the business toward "load shifting," or getting
consumers to handle more of the routine checkout work at stores.
Reversing those efforts, Mr. Sheffi writes, won't help the
retailers meet their critical need to improve the margins on their
e-commerce sales.
QUOTABLE
IN OTHER NEWS
Shares in Roadrunner Transportation Systems Inc. plunged nearly
20% after the trucking company reported a steep decline in net
profit and cut its earnings guidance by almost half. (WSJ)
The number of Americans filing new applications for jobless
benefits climbed last week, but the overall level showed an
expanding labor market. (WSJ)
Dollar General Corp. bought 41 former WalMart Express locations
left behind after Wal-Mart Stores Inc. abandoned its small-store
strategy. (WSJ)
U.S. electronics company Avnet Inc. agreed to buy Premier
Farnell PLC for $907 million, trumping a previous bid for the maker
of the $5 Raspberry Pi computer. (WSJ)
British Airways parent IAG is further cutting back growth plans
in the face of slack passenger demand and the U.K.'s Brexit vote.
(WSJ)
Lumber Liquidators Holdings Inc. posted a big second-quarter
loss as the company felt the impact of an investigation into its
Chinese-made laminate flooring. (WSJ)
The U.S. home ownership rate fell to the lowest level since 1965
in the second quarter. (WSJ)
Lab equipment maker Thermo Fisher Scientific Inc. raised its
outlook for the year after reporting a 6.2% gain in revenues.
(WSJ)
Fertilizer giant Potash Corp. of Saskatchewan Inc. slashed its
outlook for the second time this year but said the commodity market
may have hit bottom. (WSJ)
The U.S. Surface Transportation Board is proposing to loosen the
restrictions shippers face in switching cargo among large
railroads. (Progressive Railroading)
Members of a militant teachers' union ended their week-long
blockade of a freight rail line in western Mexico. (EFE)
YRC Worldwide's second-quarter profit expanded 4.2% to $27.1
million despite declining trucking revenue. (Kansas City Star)
Less-than-truckload carrier Old Dominion Freight Lines Inc. said
net profit fell 5% in the second quarter to $81.4 million.
(Transport Topics)
Some of the world's biggest car makers are investigating their
paint supply chains after their suppliers were linked to sites in
India where child labor and debt bondage are widespread. (The
Guardian)
Freight forwarder DSV A/S says it expects to be in the market
soon for another big acquisition after taking in UTi Worldwide this
year. (Shipping Watch)
India is spending $4 billion to build a transshipment port, part
of the growing investment the country is making to compete with
China in trade. (Reuters)
Scorpio Tankers, the crude oil-hauling arm of Scorpio Group,
posted sharply lower net profits for the second quarter. (Lloyd's
List)
Kmart has started pushing most of its goods straight to store
shelves rather than stockrooms as it pares back on overall
inventory. (New York Post)
Isuzu Commercial Truck of America opened a 100,000-square-foot
parts distribution center in northeastern Pennsylvania. (Fleet
Owner)
ABOUT US
Paul Page is deputy editor of WSJ Logistics Report. Follow him
at @PaulPage, and follow the entire WSJ Logistics Report team:
@brianjbaskin, @lorettachao, @RWhelanWSJ and @EEPhillips_WSJ, and
follow the WSJ Logistics Report on Twitter at @WSJLogistics.
Subscribe to this email newsletter by clicking here:
http://on.wsj.com/Logisticsnewsletter .
Write to Paul Page at paul.page@wsj.com
(END) Dow Jones Newswires
July 29, 2016 06:39 ET (10:39 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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