Supply chain giant Li & Fung Limited reported sales grew 26 percent in 2011 as it brought on a slew of acquisitions to bolster its global sourcing capabilities for western retailers and began tapping Asia's growing demand for consumer goods.
The Hong Kong company reported sales reached $20.0 billion compared to $15.9 billion in 2010. Gross profit reached $2.99 billion, or 14.9 percent of sales, up 130 basis points from 2010. Selling and distribution expenses reached 4.2 percent, merchandizing expenses were 6.2 percent and administrative expenses 0.5 percent of sales. Core operating profit reached $882 million, or 4.40 percent of sales, down 16 basis points from 2010. Cash earnings climbed 25 percent to $850 million while profits attributable to shareholders increased 24 percent to $681 million, or $8.43 per share.
Sales of Softgoods, which consist largely of apparel to U.S and European retailers, rose 17.1 percent to $12.9 billion and now account for 64 percent of sales. Sales of in the rapidly growing Hardgoods business – which nows spans cosmetics, constume jewelry, furniture, stationery and toys – rose 39.6 percent to $6.72 billion. The remaining 2 percent of revenue was attributed to the sale of logistics.
Sales in the United States reached $12.0 billion, up 15.8 percent from 2010, while sales to Europe rose 11 percent to $4.28 billion and sales to the Rest of Asia reached $1.22 billion, more than 4.5 times. The growth in Asian sales, attributed to the acquisition of Integrated Distribution Services Group Limited (IDS), reduced the U.S. share of Li & Fung's revenue to 60 from 65 percent and Europe's share to 21 from 24 percent compared to 2010.
“Asia has become an important growth platform for Li & Fung’s businesses and sourcing activities, as brands and retailers around the world are increasingly focusing on the region,” the company said in earnings release. “LF Asia accounted for 26% of total Distribution Network’s turnover in 2011. At the same time, sourcing volume from Asia reached $14,713 million. Asia represented 92% of the Group’s total sourcing activities, spanning 20 economies in the region, including China, Vietnam, Indonesia, India, Cambodia, Thailand and the Philippines, as the Group continues to expand its sourcing network.”
Nearly 80 percent of the company’s sales, or $15.9 billion, and 46 percent of its core operating profits came at its Trading Network, which handles global sourcing. Sales there rose 15.6 percent from the prior year. The company’s distribution network, which operates onshore distribution businesses in the US, Pan-European and Asian regions, accounted for $6.31 billion in sales and $304.0 million in core operating profit. The Logistics Network generated $446.4 million in sales and $12.9 million in core operating profit.
