HONG KONG — Logistics and sourcing giant Li & Fung said it saw lower profits and sales in the first half of the year as it cited a “tough economic and retail environment” characterized by rampant discounting and the rise of e-commerce.
The company said its net profit attributable to shareholders more than halved to $72 million from $149 million. Core operating profit for the six months ended June 30 tumbled 14.2 percent to $156 million. Sales shed 6.4 percent to $8.07 billion.
Executives characterized the business environment as extremely challenging. The company sources goods for about 8,000 retailers in more than 100 countries including giants such as Wal-Mart Stores Inc. and Nike Inc.
“Two-thousand sixteen is one of the toughest trading periods we have ever seen. Retailers are extremely challenged right now. They are grappling with the impact of e-commerce, a pervasive promotional environment and high levels of inventory. This translated to a lower order volume for our business during the first six months of the year,” said Spencer Fung, Li & Fung Ltd.’s chief executive officer.
Later at a press conference in Hong Kong, Fung said he expects the company’s order book for the second half to be similar to that of the first half. Meanwhile, he said the company will start digitizing each step of the supply chain to keep costs down.
“We will focus on our core customers. Despite the challenges, our market share has actually grown, especially in the logistics area,” the executive said. “The retail environment is almost permanently on promotion, this has become the norm and its squeezing the supply chain. Demand for apparel is weak, we see that the furniture category is much stronger.”
Fung said the company will focus on areas like fast fashion, home goods and leisure items going forward. “We see opportunities in all these areas,” he said.
While the company cited the rise of e-commerce and the challenge it poses to traditional retailers and its client base, Fung said the company will look to capitalize off the technological revolution sweeping the retail industry.
“We are excited about the future and that’s a lot because of e-commerce. It represents a very big opportunity,” he said.
William Fung, Li & Fung’s chairman, added: “The retail environment continues to be very weak. In the first half of 2016, we have seen disruption to production markets, an uncertain trade policy environment and historically low freight rates.”
Li & Fung said it is on track to deliver on its three-year strategic plan goals of building a long-term sustainable enterprise, simplifying the business and focusing on organic growth. The company recently sold its Asia consumer and health-care distribution business for $350 million to focus on its core business of trading and logistics.
Li & Fung posted disappointing figures for full-year 2015 back in March and said at that time, it was preparing for another tough year. The company’s stock price has performed poorly so far this year.