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 The country accounts for nearly half the firm’s manufacturing, but no longer represents the fastest growth.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.”
“What he has done at Vuitton is really exceptional,” said @gameofthrones’ actress Gwendoline Christie on @mrkimjones’ final show for @louisvuitton. “He has rebooted luxury in terms of making it commercial, viable and contemporary. And most importantly artistic. He has never compromised his artistic vision for the sake of commodity.” (📷: @zefashioninsider)
After seeing a demand for men’s wear from its customers, British contemporary women’s wear label @ariesarise has added a men’s wear component and will launch a unisex collection with @mrporterlive. The 20-piece collection includes jackets, denim, logo T-shirts and more with deconstructed ‘90s vibes. Set to launch on January 18, you can shop the pieces on Aries’ website and on mrporter.com. #wwdfashion
“And so spending so much time with a character who thinks like that, inevitability you try and analyze yourself and go back and think about your own demons and dark chapters that you had in your life,” says @thedanielbruhl of his role in TNT’s “The Alienist.” The show, set in the Gilded Age of New York, also stars Dakota Fanning and Luke Evans. Head to WWD.com to read about how 39-year-old Brühl prepared for the role and why he thinks the show is so relevant to today #wwdeye ( 📷: @Eriktanner)
Now that Celine Dion’s collection has topped $10 million in sales, the pop superstar, fashion icon and newly-minted industry player is eyeing growth in Asia. Read the full report by @tiffanyap, link in bio. #wwdnews #celinedion
“My personal philosophy to beauty is paying attention to oneself. I love to be outdoors, lots of fresh air, trying to take care of yourself as best you can. I always notice that comes through,” says Felicity Jones, the global face of @shiseido-owned @cledepeaubeauteus, which launches today. Head to WWD.com to read more about the actress’ love for beauty and how she prepared for her new role in “The Basis of Sex,” playing the young Ruth Bader Ginsburg. #wwdbeauty (📷: @dandoperalski)
Among the familiar faces at @off____white’s show was a surprise figure: Japanese artist @takashipom, pictured here on Wednesday morning. Other show-goers included @jerrylorenzo, who spoke about his upcoming project: a @nike collaboration for back to school, with designs inspired by his childhood on the West Coast. Sitting in the front row were Future, Don Crawley, @miguel and more. See the rest of the photos on WWD.com #wwdeye (📷: Stephane Feugere)
According to @laurentsai, former “Terrace House: Aloha State” cast member, she didn’t know she was auditioning for the Japanese version of “Real World.” “I was telling a couple of my friends and someone’s like, ‘That sounds a lot like Terrace House.’ I was like, ’No it can’t be.’” Turns out, it was. But Tsai isn’t just a reality star — she’s an illustrator who has worked with Starbucks Japan and most recently, she’s dipping her toes into the fashion world. Head to WWD.com to read about her time on the show, modeling and her art. #wwdeye (📷: @danieldorsa)
More changes are coming to New York Fashion Week: Beginning with the spring 2019 collection, @alexanderwangny will move his New York show to June from September, adopting a biannual schedule with collections shown in June and December. Additionally, the @cfda is planning for an official summer/winter fashion season taking place as soon as June and December 2018. Read more about the upcoming changes on WWD.com. #wwdnews #wwdfashion (📷: @slovekinpics)