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.
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews
“Stranger Things” is getting a new cast member for season 2. Meet @sadiesink_, the 15-year-old who will be joining the Netflix series for its new season. You may recognize her from “The Glass Castle” with Brie Larson and Woody Harrelson, but the Texas native’s next role goes in an entirely different direction. She describes her character, Max, as “a rough and tumble skater girl [who] becomes friends with the boys at school.” The second season debuts on October 27. (📷: @jgreenery) #wwdeye
Amid the Harvey Weinstein controversy, there’s another sector that’s being put under the spotlight for sexual abuse: the modeling industry. While rumors about abuse and sexual harassment of female and male models — and the photographers, agents and others who perpetrated it — have circulated within the fashion world for years, model @cameronrussell started posting stories from models on Instagram last week about abusive situations they’ve encountered — from sexual harassment and molestation to attempted rape. Over 75 have weighed in so far. Read more on WWD.com. Link in bio. #wwdnews
To celebrate its 16th anniversary, @dylanscandybar tapped designers and celebrities to create mosaics out of candy. The mosaics will be auctioned off to support the philanthropic cause of each participant’s choice. Pictured here is the mural created by @aliceandolivia's Stacey Bendet. For a first look at some of the other artwork being unveiled tonight, go to WWD.com. #wwdeye
The annual Veuve Clicquot Polo Classic in Pacific Palisades this weekend drew Kate Hudson, Tracee Ellis Ross, Laura Dern and more. See pictures of the star-studded event on WWD.com. (📷: @chelsealaurenla) #wwdeye
In his new book “Hollywood Royale,” Andy Warhol’s Protégé Matthew Rolston celebrates the Eighties revival of Hollywood glamour. Featuring more than 100 portraits taken by Rolston from 1977 to 1993, the book contains photos of icons like Michael Jackson, Cyndi Lauper, and @drewbarrymore, pictured here in 1991. “Hollywood Royale,” out today, will be accompanied by an exhibition opening at Los Angeles’ Fahey/Klein Gallery on March 1. #wwdeye
"Nowadays when life is not so happy with everything going on in the world, I think people come to me for a little bit of whimsy and color and fun." - Designer Rebecca De Ravenel on her cult-favorite jewelry line. (📸 : @vsteves) #wwd40
“Everyone is talking about how the retail industry is struggling, but I think it’s an incredible time because brands who are doing something different and innovative are setting themselves up for the future,” said @adamgoldston, who founded the luxury athletic brand @apl with his brother @ryangoldsten. The Goldston’s are part of WWD’s 40 under 40: a group of industry notables. See the rest of the list on WWD.com. (📷: @vsteves) #wwd40
@eyeswoon blogger Athena Calderone debuted her first-ever cookbook, “Cook Beautiful,” which is heavily centered on the presentation and visual expression of food. Pictured here are her miso glazed carrots from the book. Get the recipe on WWD.com. (📷: @johnny_miller_) #wwdeye