NEW YORK — Looking to extend their lead as the world’s largest apparel sourcing company, Li & Fung Ltd. executives have set an ambitious goal — to become a $10 billion firm by 2007.

That would be a significant jump from the $6.06 billion in revenue for the fiscal year ended Dec. 31, a 10.6 percent gain from $5.47 billion a year earlier. Net income in the year was $196.5 million, up 25.1 percent from $157 million in 2003. (Figures are converted from Hong Kong dollars at the average exchange rate for the periods.)

This story first appeared in the March 23, 2005 issue of WWD. Subscribe Today.

Li & Fung officials said they aren’t counting solely on acquiring companies as the way to drive growth, and as a sign of that plan to pay a $205.8 million dividend to shareholders.

“For a long time now, Li & Fung has been a cash-rich company, and to some extent we’ve been criticized for not having an efficient balance sheet,” group managing director William Fung said during a Tuesday news conference in Hong Kong that was broadcast on the Internet. “We were thinking maybe we were waiting for a big acquisition. Our feeling at this moment is that we probably are sitting on too much cash.”

After the payout, the firm will retain a $100 million war chest, which Fung described as “adequate to fund a very aggressive acquisition strategy.”

In recent months, Li & Fung has acquired U.S. knitwear maker Ralsey, as well as European suppliers BMB and Zeeking. Bruce Rockowitz, Li & Fung’s president and chief executive officer, said the firm has signed a memorandum of understanding to acquire another U.S. licensed apparel maker, which he declined to identify since the deal has not been completed.

“We’ve set up a fantastic machine to acquire medium and small companies, and there’s a lot of them in the market,” he said.

He also noted that Li & Fung recently took over the apparel sourcing operations of Mervyn’s and Marc Ecko Enterprises.

Li & Fung officials acknowledged they hadn’t hit all the targets set in their last three-year plan, which had called for 15 percent compound annual sales growth from 2002 through 2004. The actual growth rate for that period came to 13 percent. However, Fung noted that margin growth outpaced sales growth over that time.

“While our top-line growth was not as spectacular as we had hoped, it’s still in the double-digit region, and in the face of some severe price deflation, what we have done is manage our expenses very well,” he said.

Fung added that the company intended to continue to boost margins by adding services, such as design and logistics, and by increasing its sale of licensed branded products. In addition to Levi Strauss Signature tops and Levi’s Red Tab men’s tops, Li & Fung sells licensed products under the Disney and Cannon brands. The firm projected its branded products revenues would reach $1 billion by 2007.

The company noted that during the last three years it reduced its dependence on the U.S., which represented 68 percent of sales in 2004, down from 73 percent in 2002, and on soft goods, to 67 percent from 72 percent. Over that time, it grew its sales to Mexico and Canada, and also increased its offering of hard goods, such as toys and home decor items.

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