Retail Sector ‘Flux’ Cuts Into Li & Fung Sales, Profits

For the fiscal year ended December 31, Li & Fung, which sources product for major retailers in the United States including Wal-Mart Stores and Kohl’s, posted profit attributable to shareholders of $421 million, or five cents per share, compared with $441 million, or five cents per diluted share, in the 2014 fiscal year.

Profit attributable to shareholders in the earlier year, excluding a loss from discontinued operations, was $539 million, or six cents per diluted share, Li & Fung indicated.

Sales, or turnover as it is termed by Li & Fung, slipped 2.4% to $18.83 billion.

Spencer Fung, Li & Fung group CEO, noted that, “2015 was a challenging year. Our major markets in U.S., Europe and Asia all experienced strong headwinds. However, our business foundation remains solid and our turnover was resilient. There was an increase in trading unit volume and continued growth with our core customers. Our logistics business continued to be high-growth despite economic challenges across Asia and in the global freight market.”

He added that an evolving retail market is “impacting everyone along the value chain. Our customers are looking to us to help them navigate these changes with innovative products and increased speed to market across all available consumer buying channels, especially mobile and e-commerce.”

Fung continued, “All indications so far point to a challenging 2016 for both retail and the world’s economy. Increasing our market share and growing with our customers remains a key priority. We’ve aligned our teams to core customers and key product verticals, continue to simplify our structure to improve speed and flexibility, and have introduced technology and innovation to drive product development and operational efficiency. We are also partnering with technology and innovative companies to offer products with more excitement to our customers. I am confident in the strength of our business and the tremendous abilities of our people. We are building a long-term sustainable business for the future, with a solid foundation. I am excited about the opportunities that lie ahead.”

In 2015, Li & Fung reorganized to focus on core customers and product innovation in three initial areas of sweaters, furniture and beauty, the company pointed out, as a means of helping customers differentiate product offerings and increase margins.

William Fung, Li & Fung group chairman, said, “The retail industry is facing unprecedented changes. Brands and retailers are challenged globally, to meet evolving consumer expectations against the backdrop of weak macroeconomic conditions.”

He added, “Along the supply chain, these changes at retail are having enormous impact. Vendors and factories globally need help to increase speed to market, improve margins and produce unique products for changing and demanding consumers. Vendor support services is helping factories gain operational efficiencies and migrate production geographically while the retail industry is in flux.”