Li & Fung Says Retail Disruption Dragged Down Sales in 2015

Li & Fung Says Retail Disruption Dragged Down Sales in 2015

Li & Fung Limited, which designs, sources and distributes consumer goods for many of the world’s leading consumer brands, reported sales 2.4 percent to $18.8 billion in 2015.

“2015 was a challenging year,” said Spencer Fung, Group Chief Executive Officer of Li & Fung. “Our major markets in US, Europe and Asia all experienced strong headwinds. However, our business foundation remains solid and our revenues 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.”

Revenues in the trading business decreased 2.8 percent, while the logistics business continued its high growth with revenues increasing by 6.7 percent. Operating costs were flat in the second half of the year, despite ongoing investments in infrastructure, Logistics and Vendor Support Services.

Core operating profit decreased 15.2 percent to $512 million. Profit attributable to shareholders decreased by 4.6 percent to $421 million. Basic earnings per share were 39.1 HK cents (equivalent to 5.04 US cents), a decrease from 41.1 HK cents (equivalent to 5.29 US cents) in 2014. Excluding the results from discontinued operations in 2014, basic earnings per share would have decreased from 50.3 HK cents (equivalent to 6.46 US cents) to 39.1 HK cents (equivalent to 5.04 US cents). The Board of Directors has proposed a final dividend of 15 HK cents per share (2014 final: 21 HK cents).

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

Spencer Fung said the changes happening at retail are 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,” he said.
In 2015, the Company reorganized to focus even more on core customers and product innovation in three initial areas of sweaters, furniture and beauty to help customers differentiate product offerings and increase margins.

“Along the supply chain, these changes at retail are having enormous impact,” said William Fung. “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.”

Spencer Fung concluded, “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,” he continued. “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.”