Li & Fung Profit Rises 16% on Improved Sales to U.S.

lifung_970857.bmpHong Kong—Li & Fung, one of the world’s largest suppliers to retailers, , the world’s reported first-half profit rose 16% thanks in part to sales increases in the United States.

Net income rose to $111.4 million in the six months that ended in June from a restated $96.4 million a year earlier, the company led by billionaire Chairman William Fung said today in a statement to the Hong Kong’s stock exchange. Sales increased 3% to $8.7 billion.

Core operating profit fell 9% in the half to $227 million, slightly below an average forecast of $232 million from analysts.

Global Brands Spun Off

Li & Fung recently completed a separation from its brand-management unit, Global Brands Group. The Hong Kong-based company also restructured LF USA and discontinued some of its less profitable brands before folding the U.S. business into Global Brands Group Holdings Ltd., which began trading on July 9.

The brand-management unit, which manages more than 350 labels, including Coach Inc. shoes, and licenses characters such as Angry Birds and Spider-Man, had been dragging on Li & Fung’s finances, according to Chris Zee, an analyst at HSBC. The company intends to focus more on its core businesses of supplying apparel, toys etc. to global retailers.

While its first half profit grew, Li & Fung gave a cautious prognosis, noting that retailers are delaying orders until they get a better idea about the outlook for consumer confidence in the third quarter.

Li & Fung’s first-half earnings were boosted by a one-time $98 million gain related to the way it accounted for acquisitions. Li & Fung has traditionally relied on acquisitions to fuel growth, but the company has slowed acquisitions and spun off Global Brands Group Holding Ltd. instead. Global Brands separately today reported its first-half net loss widened to $98 million from $49 million a year earlier as costs rose on investment in investment in developing new licenses.

Chairman Fung noted there are opportunities to expand in China in the long term.

“In China, which remains Asia’s most important economy, the government’s focus on fighting corruption and its pull-back on being an export-driven economy is impacting consumption in the short term,” Fung said.

Li 7 Fung said in May that factory facilities of some suppliers in Vietnam, which accounted for 7% of sourcing last year, had been damaged during anti-China protests earlier this year and that the disruption caused would mainly affect clients in the United States.

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