Li & Fung feels effects of slow Europe demand

 
Marion Dakers
LI & FUNG, the Chinese firm that supplies consumer goods to some of the world’s biggest companies, fell short of forecasts announcing a 69 per cent slump in half-year profits yesterday.

The supplier, which counts Wal-Mart, Toys R Us and Abercrombie & Fitch among its customers, posted a profit distributable to shareholders of $96m (£62.1m), its lowest in eight years.

Turnover was flat at $9.13bn, although the firm’s margin rose from 14.5 per cent to 15.1 per cent.

Li & Fung said the slide was caused by dwindling demand in Europe and the US, but added that it expects a recovery during the rest of the year.

“Following a disappointing year in 2012, we believe the worst is behind us, and we are on track to recovery in 2013,” chairman William Fung said in a statement.

The company’s business is skewed heavily towards the second half of the year, when back-to-school sales and Christmas gifts drive sales.

“The extent of this skewing effect is even greater this year, with customers requiring shorter lead times and less inventory, and therefore requesting shipments closer to the peak year-end retail season,” the firm said.

The Hong-Kong based group switched its strategy three years ago to become less of a middleman and more of a brand-management business. It has almost completed a restructuring of its US distribution business.