Peter J. Rose, whose business brilliance was matched only by his laconic wit, announced his retirement yesterday from Expeditors International, a one-office company he joined 32 years ago and subsequently built into a $6 billion-a-year global powerhouse.
Rose, the Seattle-based company's chairman and CEO, will retire from the CEO post on March 1, Expeditors said. A successor will be announced in January, and Rose will remain as chairman through May 2015. In keeping with Expeditors' "promote from within" culture, a successor is almost certain to come from inside the organization.
In July 1981, Rose and James Wang, both of whom had been in the shipping business for several years, met at a bar on Hong Kong's Lantau Island. There, they sketched out on a cocktail napkin what was at the time a relatively unique model of "one-stop shopping" for international freight forwarding and customs brokerage services. Later that year, Rose and Wang, along with a third individual, Glenn Alger, joined Expeditors International of Washington Inc., a forwarder founded in 1979 and that had only one office in Seattle.
The rest is history. Propelled by the great push toward globalization, the dramatic expansion of import traffic from Asia to the U.S., and the growing need of companies for a logistics partner to manage increasingly complex international transactions, Expeditors' business took off and never looked back.
Since it went public in 1984, Expeditors has generated double-digit annualized growth in earnings before interest and taxes (EBIT) in all but four years, according to Robert W. Baird & Co., an investment firm. Even in the past decade, a period marked by a nasty global recession and continued slowing in its core airfreight business, Expeditors posted compound annual growth rates in net revenue—revenue after the costs of purchased transportation—and earnings per share of 10 percent and 12 percent, respectively, according to Baird.
Along the way, long-term investors became very rich. From March 1990 through October 1 of this year, Expeditors stock rose 5,591 percent. That activity encompasses the last three years, during which time the stock price fell 20 percent from its late 2010 high due to a decline in airfreight demand and tighter capacity controls by carriers that pressured Expeditors' yields.
As of the end of 2012, air freight accounted for 44 percent of Expeditors' $5.98 billion in revenue. Ocean freight accounted for 33 percent, and the category called "customs/distribution/other" made up the remaining 23 percent.
CULT OF THE PERSONALITY
In an industry replete with conventional wisdom, Rose trod down his own path. He rarely granted media interviews and saw no need to employ a battery of public relations professionals, either in-house or under contract. One public relations executive, hired in-house during the early 1990s, quit soon thereafter, complaining she had nothing to do. The standing joke was that "P.R. was the company's PR," a reference to Rose's initials.
Most of Rose's public comments were contained in the company's eagerly awaited "8-K" forms, financial disclosure statements that essentially give managers free rein to discuss anything on their minds that might be important to investors. In the documents, Rose and his "Sancho Panza," R. Jordon Gates, Expeditors' president and chief operating officer, would provide lively and colorful analysis, and answer questions preselected by the company from the many queries it would receive.
Many of the responses had a mildly sarcastic tone to them, perhaps reflecting Rose's antipathy toward the scions of Wall Street. Indeed, Expeditors did little to stoke the fires of high finance. Expeditors did very few acquisitions, remarkably growing its franchise in an organic fashion while rivals scrambled to build scale—often fruitlessly--through mergers. It sought no Wall Street financing after its IPO. Analysts were left conflicted, having to be objective in writing glowing research about the company's achievements, all the while knowing their firms would do little fee-based business with the company.
But Rose's approach sat very well with investors and with employees, who were motivated by the company's "no layoff" policy and by the pot of gold at the end of their retirement rainbows. Rose, whose company owns no transportation assets, placed an enormous premium on his employees, knowing their expertise and intelligence would be the difference in a world that increasingly demanded knowledge-based solutions to difficult global problems. In return, Expeditors' employees were fiercely loyal to the company and its chairman.
In a research note today, Benjamin J. Hartford of Baird said it will be extremely difficult to find a successor to match Rose's "unique leadership style." Under his leadership, Expeditors became the "highest quality and most admired international freight forwarder in the industry," Hartford wrote.