Blog: Li & Fung's focus appears vindicated
Leonie Barrie | 15 August 2011
Battling a sluggish economic recovery in the US and Europe, as well as rising labour and raw material costs, global sourcing giant Li & Fung last week reported a 15% drop in first-half net profit but said it is on track to meet long-term targets. Indeed, the company blamed the cost of acquisitions for offsetting a 33% hike in group revenues and said it continued to grow its market share.
While Li & Fung's business model has faced criticism as retailers and brands buy less, negotiate harder and look at sourcing direct in the hope of a better deal, the firm says acquisitions have helped it enter or expand in new niche markets - such as footwear, teenage casual clothing, boy's and young men's sportswear - with significant growth prospects.
Indeed, its focus appeared vindicated later in the week when apparel seller Liz Claiborne Inc revealed it is taking steps to cut its fixed distribution costs after signing a deal with Li & Fung to deliver goods to its stores and wholesale business. The move is part of a wider goal by the debt-ridden company to cut $25m worth of costs.
While the apparel industry remains concerned at the impact of rising commodity and input prices, another sourcing challenge could be looming: a serious liquidity crisis among many textile and garment businesses. Chinese banks are cutting lending to smaller or low-tech businesses, Indian firms face substantial interest on loans, and the problem is poised to hurt manufacturers in Vietnam too.
New research, meanwhile, has warned that possible changes to Cambodia's labour law could raise the risk of future strikes in the country and undermine the competitiveness of the garment industry. The government is planning to ease restrictions on the use of temporary short-term employment contracts (called 'fixed-duration contracts') - leading to calls for international apparel buyers and their suppliers to take steps to put an end to the practice.
UK retailer Marks & Spencer is moving ahead with its Plan A initiative to become the world's most sustainable major retailer by 2015, after signing a deal to give full 'raw material to store' traceability on every single clothing product it sells. Beginning with kids' wear, the company will start collecting information from the extended supply-chain, describing where and how every product is made, including the source of the raw materials such as cotton and wool.
Frustrated by attempts to strike a free trade deal with the US and hurting from a plunge in exports to neighbouring Venezuela, Colombia is on a mission to find new markets for its textile exports. Not only has the country been forging as many partnerships as possible, but it is working to stabilise the peso and looking to elevate sales to Mexico.
Fresh from their disappointment at seeing the Trans-Pacific Partnership (TPP) free trade deal abandoned last month with an executive order by President Donald Trump, the US apparel and footwear sector...
With the ultimate aim of ensuring all the cotton in its products is sourced sustainably, value clothing retailer Primark is adamant that having a business model focused on offering the lowest prices o...
Last week we marked the inauguration of Donald Trump as the 45th president of the United States by taking a closer look at what's at stake for the textile and apparel trade – especially his promises t...
Continuing our look at what lies ahead for the apparel industry and its supply chain in 2017, the panel of industry experts consulted by just-style last week tackled likely shifts in the sourcing land...
- China leads US apparel sources with falling prices
- Vietnam grows share of US apparel imports in 2016
- US apparel sector braces for potential cost hikes
- Trade Tracker – Trump's first weeks, Brexit agenda
- Key trade issues facing US textiles and apparel
- Bangladesh "high threat" for terrorist activity
- VF Corp sees Q4 and FY earnings tumble
- Sales at US clothing retailers jumped in January
- Ralph Lauren new execs to support Way Forward Plan
- Adidas and Burberry recognised for sustainability
- When Things Go Wrong - A Practical Guide to Managing Common Problems in Apparel Sourcing
- Outdoor performance apparel 2016: A broader perspective
- Technical textile markets: product developments and innovations, December 2016
- Southeast Asia strategic sourcing review – a focus on Cambodia, Vietnam and Myanmar
- Global market review of lingerie – forecasts to 2022