A shake-up atop Li & Fung’s LF USA unit — which saw the baton passed to Dow Peter Famulak from Rick Darling — signals a renewed effort to turn around the company’s U.S. operations and, perhaps, a new approach at fashion’s most powerful sourcing firm.
On Friday, the company warned its 2012 profits would likely fall short of the prior year’s take of $681.4 million. Core operating profit is expected to fall 40 percent.
“Based on the preliminary review of the ongoing restructuring of LF USA’s business, including the reduction in the number of brands distributed in the USA which negatively impacted the company’s margin, the group’s efforts to improve the second-half results will not achieve an improvement in core operating profit,” Li & Fung said.
The rest of the company’s operations performed as expected.
The U.S. division has been a challenge for the Hong Kong-based Li & Fung, which flagged the unit’s slower-than-expected turnaround over the summer.
The hope is Famulak will be able to complete the turnaround of Li & Fung’s U.S. operations this year. He was quietly tapped as president of the division last month and is responsible for its day-to-day operations.
Famulak continues to be president of LF Europe, a role he took on in May. He is also president of the Direct Sourcing Group, a dedicated subsidiary servicing Wal-Mart Stores Inc., and president of LF Beauty, Li & Fung’s health, beauty and cosmetics business.
The switch moved Darling into a “non-operating role” at the company. A spokeswoman said Darling would now focus on business development for LF USA and LF Europe as well as key customer relationships with companies such as Wal-Mart.
Darling did not return a request for comment and a spokeswoman for Li & Fung in the U.S. declined to comment.
There have been rumblings for the past year that the U.S. division was troubled, following its many acquisitions.
Sources describe Darling as a personable executive who is good at seeing the big picture, with a strong suit in business development. They also noted that Famulak’s operations expertise would help him address issues that have cropped up as the company acquired a number of businesses over the past five years.
“When they bought companies, they just kept them as companies,” said one source. “It’s not one company Li & Fung, it’s Li & Fung a holding company of lots of little businesses.”
Although Famulak’s new position heaps on additional responsibilities, he is believed to be able to handle the added pressure.
Sources noted that Famulak could take the division in a new direction and speculated that LF USA may have overpaid for the companies it bought and fell short on back-office integration. Those individuals specifically cited the acquisitions front as the problem at LF USA, not its sourcing component.
LF USA made its big acquisition play under Darling’s rule, starting with the $330 million purchase of handbag firm Van Zeeland Inc. in 2008. Van Zeeland’s brands include Kathy Van Zeeland, B. Makowsky and Tignanello. It then acquired Kids Headquarters in 2009 for between $100 million and $140 million, footwear firm Jimlar in 2010 for reportedly $450 million and the Oxford Apparel Group division of Oxford Industries for $121.7 million that same year. In 2011, LF USA snatched up Beyond Productions, boys’ apparel firm Fishman & Tobin, and accessories firm Crimzon Rose, each at an undisclosed amount.
LF USA has also entered into a number of licenses over the years that include Jonathan Adler, Ellen Tracy, Vena Cava, Marchesa, Nautica dress shirts and Geoffrey Beene pant license, among others. That’s not including the licenses bought through acquisitions.
Sources said the company could trim back on a number of its licensed businesses.
“The days of the manufacturing-only model that Li & Fung was building on, these days are numbered,” said another source. “That’s a model that is costly and a lot of people of any size and scale don’t really need Li & Fung to do their manufacturing.”
Li & Fung coordinates production for brands and works with the factories, charging both sides about 6 percent off the top, a source said.
Darling’s position at Li & Fung gave him a high-profile position in the industry.
Darling is the current chairman of the American Apparel & Footwear Association. Kevin Burke, president and chief executive officer of the Washington-based trade association, said Darling would serve out his term, which ends in March.
“The industry has greatly benefited from his leadership as the chairman of our organization for the past two years,” Burke said.
My character, Dinah Madani, is just the coolest, [most] badass woman imaginable," says @amberroserevah. The actress stars in @marvel's newest series on @netflix, @thepunisher. To prepare for her role, Revah sat down with Homeland agents to get a real sense of with Dinah's day-to-day life is really like. Read our full interview on WWD.com. #wwdeye (📷: @jilliansollazzo)
A scene from the 91st annual @macys Thanksgiving Day Parade. The parade, which boasts 50 million TV viewers and 3.5 million on-site spectators, is considered one of the largest and most watched parades in the world. (📷: Jason Szenes/EPA-REX)
The circus came to @bloomingdales 59th Street on Tuesday night and lit up Lexington Avenue with acrobatic dancers, death-defying knife throwing, sword swallowing and aerial acts with no net. The 45 minutes of theatrics built up to unveiling the holiday windows depicting @swarovski crystal-encrusted circus pieces and scenes from “The Greatest Showman” – songs from the soundtrack included. See the rest of the photos on WWD.com #wwdfashion (📷: Joshua Scott)
The psychedelic fashion that pervaded the ’60s is back with an exhibit at the @museumofcityny. “Mode New York: Fashion Takes a Trip” chronicles the changing styles from 1960 through 1973 and features designers such as @ysl, @oscardelarenta and more. The exhibition, which is on display through April 1, is organized into four periods: First Lady Fasion, Youthquake, New Bohemia and New Nonchalance. Pictured here is model Pat Bardonella during the Garvey Day Parade in 1968. (📷: @kwamebphoto) #wwdeye #wwdfashion
“People should be a lot more honest in expressing both the dark and light of themselves. We need to give each other the space to do that because it’s the only way we can grow and evolve,” says @noelwells of her new film “Mr. Roosevelt,” which is largely based on her own struggles. Unexpectedly leaving @nbcsnl in 2014 after just one season, Wells felt set back in her self-esteem and career trajectory. She quickly refocused her energy to more personal projects, which led to the completion of “Mr. Roosevelt.” Read the rest of WWD’s interview with the “Master of None” actress on WWD.com #wwdeye (📷: @jilliansollazzo)
@barbrastreisand is giving fans a chance to see her perform up close in a new concert series, which makes its debut on @Netflix today. From behind-the-scenes takes to her concert performance in Miami last December, the two-hour streaming special captures Streisand in her element. Pictured here is the singer/actress photographed for WWD in 1963. (📷: Palmieri Tony) #wwdeye #wwdarchive
@chanel and @pharrell dropped what’s being dubbed as the world’s most exclusive sneakers yesterday. The Adidas Originals NMD Hu, which Williams designed in collaboration with Chanel and @adidasoriginals, has a waiting list of over 120K people who pre-registered online at chanelatcolette.fr –– and only 500 pairs are on sale. The singer predicted the resale value of the shoes could reach $40K. Read the full interview on WWD.com. Link in bio. #wwdfashion (📷: Dominique Maître)
@imanshumpert is diving deeper into his creative endeavors and relaunching his clothing line, Post 90s, and is helping to raise money for the hurricane victims in St. Maarten with a jersey he’s designed with his brother. The Cleveland Cavaliers player talked to WWD about kneeling during the national anthem, working with fashion brands and how he wants to be more than an @nba player. Read the interview on WWD.com #wwdfashion (📷: George Chinese)