HONG KONG — Li & Fung Ltd. said net profit for the full year 2011 rose 24 percent, driven by acquisitions, synergies gained from its three-year growth plan and strong growth in Asia.
The sourcing giant posted net profit of $681.2 million, compared with restated earnings of $548.5 million a year ago. Revenue for 2011 rose 26 percent to $20.03 million. Results exceeded what analysts had expected. Analysts, on average, forecast net profit of $617 million.
Speaking at a press conference, Bruce Rockowitz, Li & Fung’s chief executive officer, said he expects continued growth as the company grows organically and continues to capture synergies from its expansion plan. He also said the U.S. market is “doing pretty well” and expects the economic recovery to continue gathering strength. The European market is more grim, he said, although it has likely hit bottom.
Li & Fung’s better-than-expected results come a year after the company unveiled an ambitious restructuring plan that included a shake-up of its top management and the division of the company’s businesses into three segments: trading, logistics and distribution. As part of the three-year plan, the company set a target of reaching $1.5 billion in core operating profit by 2013, with trading, logistics and distribution contributing $700 million, $100 million and $700 million, respectively.
The company’s core business, its trading business, posted the strongest results in 2011, Rockowitz said, with $565 million in net profit, a 31 percent increase from a year ago, and 16 percent growth in revenue. Results from Li & Fung’s logistics business were boosted by its acquisition of IDS (Integrated Distribution Services Group). The unit posted a net profit of $13 million and revenue of $446 million, a 510 percent increase. Net profit in Li & Fung’s distribution business was under pressure because of rising costs. Net profit rose just 2 percent to $304 million while revenue rose 61 percent.
Rockowitz said the company didn’t pass on some of the higher costs to customers, preferring to hold on to market share rather than preserve profit margins. He expects price pressure to ease this year.
Operating costs were on the high side in 2011, increasing 14 percent in the trading business, 61 percent in distribution and 398 percent in logistics (but mainly due to the acquisition of IDS). Rockowitz acknowledged that costs were higher but that increases were actually slowing and are expected to moderate.
“Lots of the heavy lifting was done in 2011,” Rockowitz said.
As part of the three-year growth plan, the company needed to build a bigger network. The company did a lot of that building out in 2010 and 2011, Rockowitz said, explaining the company will grow into its overhead. Barring any large acquisitions in the future, overhead costs should be trending down, he said.
Li & Fung had a “very acquisitive year” with six new acquisitions and 13 small roll-up deals. The company disclosed three new deals on Thursday, saying last September it acquired True Innovations, which sells business furniture through retailers such as Costco and Office Depot. It also acquired smaller companies in roll-up deals: Midway, a licensee for Disney products in China and elsewhere in Asia, and Catalyst, a company that makes electronic tags for clothing.
Asia has become an important growth platform as brands and retailers around the world are increasingly focused on the region, the company said. While the company has always done most of its sourcing in Asia, it’s now selling more in the region, and global retailers are eyeing the area. Li & Fung said that 12 percent of its revenue in 2011 came from Asia, compared with 4 percent in 2010.
“If you look historically at Li & Fung, our reliance on the U.S. was always 65 to 70 percent. It’s now 60 percent, which we’re happy about. We’ve always produced in Asia, but in this case, the market to sell to is Asia,” Rockowitz said.
Li & Fung also said sourcing in China continues to be key.
“In spite of what you hear about China, for us it’s been very important,” the ceo said, adding that sourcing in China has actually increased. As prices have gone up, the company has shifted to higher-end business in China, he explained. “The lower margin businesses have left China,” he said.
While China remained the number-one sourcing destination for the company, Bangladesh jumped two spots to become the second-biggest sourcing destination. Production in Bangladesh jumped by 41 percent and exceeded that of Vietnam and Indonesia in 2011, the company said.
There'll be no rest for those headed to Europe for men's, as Paris just closed the gap with Milan. According to a provisional calendar released by the Chambre Syndicale, Paris Men's Week will now open a day earlier on January 16. See new highlights on the official lineup on WWD.com. #wwdnews #wwdfashion (📷: @kukukuba)
BREAKING: Jonathan Saunders is leaving @DVF. The designer has resigned from his position as chief creative officer of Diane von Furstenberg, the company said in a statement on Friday. At the time of his hire, von Furstenberg said Saunders’ arrival symbolized and facilitated her stepping back from the day-to-day duties that occupy the work of a full-time creative director. The British designer joined DVF in May 2016 and was in charge of all product categories. #wwdnews
For @versace_official’s spring ad campaign, the brand emphasized the archival prints from the spring tribute collection dedicated to the late Gianni Versace. Closing out the show were five of Gianni’s favorite models: Cindy, Naomi, Carla, Helena, and Claudia. Bowing on December 18, the new campaign is yet another tribute to supermodel-dom as the images by Steven Meisel are fronted by @iamnaomicampbell, @cturlington, @gisele and more. #wwdfashion
Four-time Oscar-nominated actress Annette Bening has been waiting 20 years to play Gloria Graham in "Film Stars Don't Die in Liverpool," which will be released on December 29. The movie about Graham – a Hollywood star known for her controversial relationship with a younger Englishman named Peter Turner – is based off a memoir Turned wrote. "She felt vulnerable to him, because she loved him, she really did love him. And anyone that we really truly are in love with, we re vulnerable to in a very deep way," said Bening. Read our full interview with the modern icon of an actress on WWD.com. #wwdeye (📷: @ninebagatelles; Styled by @cristinaehrlich)
The crisp white button down: a staple that can be dressed up or down and accessorized throughout the decades. Here, on a Art Basel-goer in 2017 on the left and on the iconic Audrey Hepburn in “Roman Holiday” in 1953 on the right. #tbt #wwdfashion (📷: Andrew Morales)
Known for her work with @victoriassecret, 25-year-old model @georgiafowler is raising her profile in Hollywood. Fowler stars in @vincecamuto’s holiday campaign, which launched in partnership with “Pitch Perfect 3.” “Almost every shoot with Vince Camuto, I’ve had to face a fear…It was definitely a challenge. I’m so grateful for it, though. I’ve always wanted to be a pop star, so that was the perfect chance,” Fowler said. Head to WWD.com to read about Fowler’s experience modeling, including at the #VSFashionShow, and her relationship with Nick Jonas. #wwdeye (📷: @jilliansollazzo)
EXCLUSIVE: Huda Kattan just became the first beauty influencer to land a major beauty deal. Kattan's business, @hudabeauty, has received a minority investment from private equity firm TSG Consumer Partners. The brand, which industry sources say is on track to do $200 million in retail sales for 2017, will receive support on product, retail and geographic expansion through the deal. Get all the details on the deal and read @_a_collins' interview with Kattan on WWD.com. Link in bio. (📷: @jgreenery) #wwdbeauty #wwdnews
Peruvian model @juanaburga_official – who is known for walking the runways of @rodarte, @viviennewestwood and @torybuch – is making the move to the big screen with drama “Los Últimos.” The film premiered in Argentina in November and arrives in the U.S. and Europe in 2018. On making the switch from modeling to acting, Burga told WWD: “It’s a completely different thing – a lot of people think it’s similar or try to connect things, especially like getting used to the camera or being looked at all the time or playing these different characrers, but film is a completely different story.” #wwdeye (📷: @jgreenery)
London’s newly opened @designmuseum will look back on the life and work of Azzedine Alaïa in a show that the designer helped to curate before he died of heart failure last month. The retrospective, which Alaïa had worked on with Mark Wilson, chief curator of the @groningermuseum, will look at the impact of his work worldwide. The show, “Azzedine Alaïa: The Couturier,” will run from May 10 to October 7. Read more about the exhibit on WWD.com #wwdnews #wwdfashion (📷: @zefashioninsider)