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Record store closures hit Li & Fung profits

Sourcing giant Li & Fung has reported a 20% decrease in core operating profit (COP) to $285m (£216m) for the year to 31 December 2018.

The drop was largely caused by decreases in turnover and total margin in the supply chain solutions business, as well as continued investment in digitalisation in line with the company’s long-term strategic plan. 

During 2018, Li & Fung said it was affected by the rapid change in retail landscape, which led to record store closures and customer bankruptcies.

Turnover decreased by 6.2% to $12.7bn (£9.6bn), mainly as a result of customers’ ongoing destocking, customer turnover and bankruptcies.

Adjusted profit attributable to shareholders decreased 15.9% to $117m (£88m). 

Profit attributable to shareholders for continuing operations decreased by 26.2% to $126m (£95m).

Spencer Fung, group CEO of Li & Fung, said: “2018 was a demanding year and we’ve made a fundamental reorganisation of our business in line with our three-year plan to build the supply chain of the future.

“We initiated a structural change with a new management team to focus on our core customers and operational excellence. This includes a new group president, a new chief operating officer and an entirely new chief digital officer position. We have the right strategy, and now the right structure and people in place. With all three elements in place, we have built the right foundation for the future. I am confident that we are on the right track.”

The group’s logistics business continued to grow, showing double-digit increases. Li & Fung reported strong demand for in-country logistics services. Turnover and core operating profit increased 10.2% and 14.6% to $1.13bn (£987m) and $86m (£65m) respectively.

Joseph Phi, group president of Li & Fung, said: “We are pursuing market share gain and pipeline conversion as the twin drivers for our growth.”

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