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Top retail supplier sets sights on Asia

Publication Date : 21-03-2014

 

The world's largest supplier of clothes and toys to retailers, Li & Fung, saw its net profit rise 17 per cent last year, beating forecasts as more Americans -buoyed by an improving economy - went shopping in the second half. Its tills rang up US$725.3 million in profit.

But the company is increasingly looking eastward, as it proposes to spin off and list its brands and licensing business in Hong Kong this year.

Called Global Brands Group - licensed brands include Coach and Disney - it aims to "further build out" its portfolio and increase its footprint.

The Global Brands Group contributed $134 million, or 15 per cent, of Li & Fung's core operating profit last year.

On why the city was chosen as the listing venue despite the preponderance of American brands in its clutch, group president Bruce Rockowitz said yesterday: "We expect Asia to be a very high-growth part of the (global) economy. Hong Kong is next to China."

Asked about economic sentiment in the US at the company's press briefing to announce its results, Li & Fung chairman William Fung said simply: "The most exciting part is Asia. The US is more of the same."

Li & Fung, which acts as a matchmaker between 15,000 factories in developing countries including China and American retailers like Walmart and Target, has been trying to diversify from its traditional core business of distributing products, by buying and managing brands.

This has also boosted its logistics and freight-forwarding business. With more than 90 per cent of its turnover in Asia, it saw a 50 per cent increase in core operating profit last year, as opposed to the trading business' 3 per cent spike.

It has just signed a deal to buy China Container Line, a sea-freight-forwarding company in mainland China, Rockowitz announced.

Still, trading remains Li & Fung's bread and butter, accounting for 62 per cent of its profit last year.

Looking ahead to the coming three years, the company said it is taking steps to deal with certain key trends. These include the relocation of factories from coastal China to inland China and cheaper countries such as Cambodia and Laos, as well as intensified focus on worker safety following a 2012 fire at a Bangladesh garment factory - a supplier to Li & Fung - which killed 111 people.

Rockowitz said a new unit will support vendors, including helping factories improve safety standards, relocate to other countries, as well as boost operational efficiency such as through raw material procurement and product design.

 

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