Analysis | Li & Fung’s latest attempt at reinvention latches on technology
CEO Spencer Fung this week unveiled a US$150 million, three-year plan to invest in IT for leading the company’s transformation
Li & Fung is trying to reinvent itself for the eighth time in 24 years.
The company, the world’s largest sourcing agent for customers including Wal-Mart Stores, will fully embrace information technology, which has already upended its century-old role as the quintessential middle person between producers and consumers, and is investing heavily to transform its business.
The transformation was given extra urgency this week, when chief executive officer Spencer Fung delivered Li & Fung’s third consecutive year of profit decline, missing analysts’ estimates with a 24 per cent slump. Core operating profit tumbled 44 per cent over three years while profit margin narrowed by 1.4 percentage point to 2.5 per cent.
“This has been one of the toughest trading environments Li & Fung has ever seen,” Fung said.
Li & Fung’s 2016 revenue fell for the third year, declining 11 per cent to US$16.8 billion, the lowest since 2009.
The only bright spot in its results was the logistics business, which reported 15.5 per cent growth in core operating profit, where the profit margin widened to 6.7 per cent due to rising e-commerce demand and expansions into the Japanese and South Korean markets.
