Sourcing on the agenda...again

By: Leonie Barrie - 25 March 2009 19:10

Bullish is a good word to describe global sourcing giant Li &Fung. The Hong Kong based firm today said it is still targeting further acquisitions and outsourcing deals despite posting a 21% slide in full-year profit.

Its upbeat outlook comes as, on the one hand, sales rose 20% in the year to HKD110.7bn (US$14.2bn) helped by organic growth and a range of outsourcing deals and acquisitions. On the other hand, though, profits were hit by weak consumer markets and one-off events such as restructuring costs in the US, as well as start-up costs in Europe.

But the company’s fortunes are, of course, inextricably linked to those of the retailers and brands it supplies.

“When things are good, there's no need to change and there's inertia. People are very comfortable with their supply. But when things are bad, people look for alternative ways of doing things,” Li & Fung president Bruce Rockowitz told just-style in January. He added: “We're in a cycle now where price is paramount.”

Over the past year, Li & Fung has taken on sourcing for Toys R Us' private label business, Sanrio, Timberland’s apparel business and Mexx. And earlier this month it took on Liz Claiborne’s sourcing operations in a move that will add an extra $1bn in revenues in 2009.

So while many of its retail customers are unlikely to see any growth in 2009, the firm is also one of the few to benefit from new outsourcing opportunities as retailers offload their sourcing interests to focus on their core retail concerns.

And it’s probably fair to say that the question over whether or not sourcing is done in-house or contracted out is likely to be on every major retailer’s agenda just now.

ANALYSIS: Will others follow Liz Claiborne’s sourcing shift?