Leading sourcing firm Li & Fung reported its full year results Thursday and turnover took a hit thanks in part to China’s challenging market and disruption at retail.
The deflationary environment coupled with currency depreciation helped send total turnover at the Hong Kong-based company down 2.4% to $18.8 billion and turnover in trading dipped 2.8%. The logistics business was the year’s bright side, sustaining 6.7% growth.
“2015 was a challenging year,” Li & Fung Group CEO Spencer Fung, said. “Our major markets in US, Europe and Asia all experienced strong headwinds. However, our business foundation remains solid and our turnover was resilient. There was an increase in trading unit volume and continued growth with our core customers. Our logistics business continued to be high-growth despite economic challenges across Asia and in the global freight market.”
Operating costs in 2015 were flat despite infrastructure, logistics and vendor support investments and operating profit fell 15.2% to $512 million.
Earnings per share were 39.1 HK cents ($0.054), down from 41.1 HK cents ($0.0529) in 2014.
“The retail industry is facing unprecedented changes,” Li & Fung Group chairman William Fung, said. “Brands and retailers are challenged globally, to meet evolving consumer expectations against the backdrop of weak macroeconomic conditions.”
Spencer Fung added, “The changes happening at retail are impacting everyone along the value chain. Our customers are looking to us to help them navigate these changes with innovative products and increased speed to market across all available consumer buying channels, especially mobile and e-commerce.”
Last year, Li & Fung said it focused more on core customers and product innovation, namely in sweaters, furniture and beauty, to help customers differentiate product offerings and to increase margins.
“Along the supply chain, these changes at retail are having enormous impact,” William Fung said. “Vendors and factories globally need help to increase speed to market, improve margins and produce unique products for changing and demanding consumers. Vendor Support Services is helping factories gain operational efficiencies and migrate production geographically while the retail industry is in flux.”
And according to Spencer Fung, 2016 won’t likely shape up to be a whole lot better than the year before it.
“All indications so far point to a challenging 2016 for both retail and the world’s economy,” Spencer Fung said. “Increasing our market share and growing with our customers remains a key priority.”
The company said it has aligned its teams to focus on core customers and key product verticals, simplified its structure to improve speed and flexibility and introduced technology and innovation to fuel product development and operational efficiency.”
“We are building a long-term sustainable business for the future, with a solid foundation,” he added. “I am excited about the opportunities that lie ahead.”