Li & Fung gears up for slow US consumer revival
November 17, 2009
By Liza Lin and Wing-Gar Cheng Singapore and Hong Kong
US consumer demand might take until the middle of next year to "regenerate", and it was unlikely China could fill the gap as the global economy recovered, Victor Fung, the chairman of Wal-Mart Stores supplier Li & Fung Limited, said yesterday.
"The slide in retail sales has been arrested, but I think it may take a little while before demand will regenerate," said Fung. "We will look towards the middle of next year for that to come back up, before you can see a perceptible pick-up in demand."
Sales at US stores open at least a year rose 1.1 percent in September, the first increase in 13 months, as discounts drew shoppers back to shops.
Li & Fung, founded in China in 1906 near the end of the Qing dynasty, is accelerating efforts to buy makers of clothing, cosmetics, home products, accessories and shoes as retailers increase reordering.
Last month, Li & Fung said that it would pay as much as $401.8 million (about R3 billion) for Wear Me Apparel, a New York-based company that holds licences for the Calvin Klein and Disney labels.
Li & Fung, which made 61 percent of its HK$46.3bn (R44.2bn) first-half sales in the US, also supplies Kohl's, Target, Zara and Marks & Spencer.
Still, Fung said, US consumers were taking time to adjust to new spending habits and were probably waiting for a sustained halt in falling housing prices and jobless rates before they regained the confidence to spend again.
Confidence among US consumers unexpectedly declined this month.
The Reuters/University of Michigan preliminary sentiment index decreased to a three-month low of 66 from 70.6 last month.
Although China's retail sales rose 16.2 percent last month, the fastest pace since January, Chinese consumers were not "picking up the slack" in American spending, Fung said.
"Globally, it's hard to see the Chinese demand making up for the US. The Chinese are not going to eat twice as much and consume twice as much."
The US and Europe were still markets that presented "a lot of opportunities" for Li & Fung because the "mass merchants are now looking for value and things that are value for money for the consumer".
Parent Li & Fung Group last month sold shares in Trinity, its luxury menswear division.
Trinity gained 1.2 percent to HK$2.45 at the midday trading break in Hong Kong yesterday. That is 48 percent higher than its initial public offering price of HK$1.65.
Trinity sells luxury menswear and accessories in greater China under brands including Gieves & Hawkes, Cerrutti 1881 and Kent & Curwen, and has a joint venture with Salvatore Ferragamo in South Korea and southeast Asia.
Li & Fung Group was waiting for its Toys R Us Asia retail unit to reach "critical mass" before it sold shares in an initial public offering, he said, without providing more details.
"We'd like to make sure it is a much bigger entity before we do that."
William Fung, the managing director of the listed company and Victor Fung's brother, in April last year said Toys R Us Asia's initial share sale might take place within four years, while Trinity's would happen within two years. - Bloomberg
|
|
