HONG KONG — Global economic problems might be causing concern from New York to New Delhi, but Li & Fung is feeling no ill effects — and sees plenty of opportunity for growth both organically and through acquisitions.
The apparel sourcing giant said Thursday that sales in 2007 registered their strongest growth in seven years — a 36 percent gain — as it revealed a three-year plan to grow core operating profits to $1 billion and revenues to $20 billion by 2010. Of this, $16 billion will come from its core sourcing business and $4 billion from onshore business in the U.S., Europe and China.
Last year, core profits rose 36 percent to $408.6 million, as sales advanced at the same rate to $11.85 billion.
The Hong Kong-based Li & Fung, which sources apparel, accessories and footwear throughout Asia and elsewhere and has 80 offices in more than 40 countries around the world, said profits attributable to shareholders reached $391.7 million. Basic earnings per share gained 33 percent to 11.5 cents.
In releasing the results, William Fung, group managing director of Li & Fung Ltd., said he believes a tough economic climate provides growth potential in sourcing.
“We think the outsourcing trend is here to stay,” he said. “I think this is an era of ‘radical’ outsourcing. People are asking, ‘Should I have my own buying office or should I outsource?’ We think we can pick up more companies that decide to close their buying offices and turn to Li & Fung. In a down market, there’s a lot of opportunity for us. Americans have a saying, ‘If it ain’t broke, don’t fix it,’ well… there’s something broken out there.”
Fung said the outlook for 2008 is somewhat optimistic because the company already has orders in hand through the back-to-school season.
“We’re not putting our heads in the sand and saying it doesn’t matter what happens, but at the real economic level, sales are not as bad as we thought,” he said. “We’re up from last year already.”
Fung also stressed that China will continue to play a vital role in the company’s sourcing business, despite increased costs and difficulties there. The country accounts for nearly half the firm’s manufacturing, but no longer represents the fastest growth.
China is experiencing rapid inflation and higher labor costs. Its factories are increasingly moving operations, primarily from the Pearl River Delta, long the core of manufacturing, to less-developed provinces. International trade protectionist measures, which Fung believes will increase during economic downtimes and are often directed at China, are another important factor. Still, China is and will continue to be a cornerstone of Li & Fung’s business.
“You need many Vietnams to make one China,” said Fung. “No [place] else has the capacity.”
To adapt to shifting manufacturing bases, Li & Fung has 18 to 19 buying offices in China, with more set to open around the country.
“People who say they have a buying office in Shenzhen aren’t sourcing China, they are sourcing Hong Kong,” said Fung of the Chinese city across the river from Hong Kong, which is a special administrative district of China.
While China will retain the bulk of Li & Fung’s sourcing business, other countries are seeing rapid increases in growth. Vietnam grew 69 percent, Turkey increased 59 percent and sourcing in Pakistan was up 45 percent in 2007. Fung attributes the success in Turkey to Li & Fung’s increased European business, which was up 26 percent last year, and said Pakistan is thriving “despite the turmoil.” Bangladesh, India and South Africa all also posted increases of 35 percent or higher.
“We are very sure that having a business model of a big network of sourcing is the right model,” said Fung.
The company said its three-year goal of achieving $1 billion in sales in its New York-based LF USA unit has been achieved. LF USA includes private label manufacturing, proprietary brands and an extensive licensing portfolio. Bruce Rockowitz, president of Li & Fung, said the company plans to duplicate this model in Europe and China.
Fung said he particularly expects the property brands business, in which a retailer has exclusive rights to sell an existing brand, to grow substantially.
“Property brands make more margin,” he said. “In a downturn, you’d rather your customers buy the higher-margin brand than the lower-margin brand.”
EXCLUSIVE: @tomford is opening its first-ever beauty store. The boutique, which opens November 20 in London’s Covent Gardens, was designed with the over-the-top glam Ford is known for. Read the full story on WWD.com, link in bio. #wwdbeauty #wwdnews (📷: Simon Wagner) #TomFordBeauty
New York-based DJ @harleyvnewton threw a party to celebrate the holiday collection of her dress and pajama line @hvn at the Ladurée Beverly Hills. It Girls @katebosworth, @rashidajones and more joined in on the fun, which included cocktails, croque monsieur sandwiches and a photo booth. #wwdfashion (📷: Owen Kolasinski/BFA.com)
For the holidays, @Burberry partnered with 20-year-old artist @blondeymccoy on a series of three outdoor murals in downtown Manhattan. The murals are McCoy’s interpretation of a Christmas eve party, the idea of charity and the spirit of family. His third mural, pictured here, is the most personal. The image depicts McCoy’s grandparents and father in London’s Trafalgar Square in the Seventies. “My work often features lots of sentimental objects.” #wwdeye
For spring 2018, designers applied bold colors and cartoonish motifs on everything from sneakers and belts to key chains. See all the top men’s accessories trends on WWD.com. #wwdtrends (📷: George Chinsee; Prop Styling by @rnasti; Market Editor: @luiscampuzano)
The @dior-sponsored @guggenheim international gala pre-party has a history of drawing cool-girl musical acts to serenade the crowd –– and last night was no exception. @haimtheband performed songs both new and old, and lured a star-studded audience with the likes of Rebecca Hall, Kate Mara, Mamoudou Athie and more. #wwdeye (📷: @lexieblacklock)
In a partnership between the @metopera and the @englishnationalopera, “Marnie” was born. The opera, with costumes sponsored by @mrporterlive, is an adaptation of the 1961 thriller by Winston Graham. Arianne Phillips, who created the costumes, is no rookie: She’s styled Madonna for her tours and created costumes for a myriad of films in the past. Read WWD’s interview with Phillips, where she talks about her inspiration for the opera’s costumes on WWD.com #wwdfashion
@barneysnyc took a different approach to their holiday windows this year. Instead of Christmas decor, Barneys tapped @thehaasbrothers to tell a story of positivity, gratitude and inclusivity via heartwarming silliness and humor. “It’s about kids and it’s about coming together and being family and loving each other,” said Simon Haas. #wwdfashion (📷: @joshuascottphoto)
Beauty influencer @kandeejohnson makes her foray into hair care with a collaboration with @ogx_beauty — making it the first time that OGX has teamed up for a product creation. The collab includes shampoos and conditioners in three scents. At 39 and a mom, Johnson is a different profile than the emerging social media stars, but is considered one of the pioneers of the digital beauty influencer world. Read WWD’s interview with her on wwd.com, including the strangest beauty product she’s ever tried #wwdbeauty