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Retail promotions hit Li & Fung margins

Global supply group Li & Fung’s turnover increased by 1.4% to $19.3bn (£12.9bn) for the year to December 31, but margin fell 2.2% due to heavy promotional sales by brands and retailers.

Margin was also affected by Li & Fung’s shift towards lower margin agency sales. Operating profit fell 18% due to the lower margins, as well as investments in logistics, freight services and setting up a new vendor support services unit.

The group said it will continue to invest in building its presence in new markets and in new product categories over the coming years.

The licence and brand part of the business, called Global Brands Group, was spun-off through a listing on the Hong Kong stock exchange last July. Global Brands holds the licences for labels including Calvin Klein and Tommy Hilfiger.

Spencer Fung, group chief executive officer, said the spin-off allowed the group to focus on its core businesses of trading and logistics.

Total turnover in logistics increased by 66% for the year and the trading business was stable.

“2014 was a challenging year for our customers and retail generally,” said group chairman William Fung. “We navigated difficult global market conditions and made necessary investments for the future.”

Li & Fung most recently acquired May Trading UK, a clothing supplier to high street multiples including Primark, Next and Topman, following its fall into administration in October last year.

LF Europe, a division of Li & Fung, also owns London-based manufacturer Just Jamie and South Shields-based supplier Visage, as part of its private label European Apparel Group (EAG).

Fung Group, the parent company of Li & Fung, has acquired various UK suppliers and brands in recent years.

Trinity Limited, part of the Fung Group through the Fung Retailing arm, acquired Gieves & Hawkes in April 2012.

Fung Capital, the private equity partnership of Li & Fung honorary chairman Victor and group managing director William Fung, acquired Savile Row brands Hardy Amies in 2008 and Kilgour in September 2013.

@Tara_Hounslea

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