Bloomberg News

Li & Fung’s CEO Rockowitz Says U.S. Consumers Are Spending

November 24, 2011

(Updates with details in sixth paragraph.)

Nov. 24 (Bloomberg) -- U.S. consumers are spending this holiday season as stores run promotions, said Bruce Rockowitz, chief executive officer of Li & Fung Ltd., the biggest supplier of clothes and toys to retailers such as Wal-Mart Stores Inc.

“All kinds of items that are great bargains” are spurring purchases, Rockowitz said in an interview with Bloomberg Television in Hong Kong today. The spending will lead to “probably the biggest Black Friday ever,” he said.

Rockowitz’s comments on the U.S., facing consumer sentiment around recession levels, reflect promotional efforts at chains including Gap Inc. and Toys “R” Us Inc. that may lead retailers to post higher sales and reduced profits over the holiday season. Black Friday, the day after Thanksgiving, marks the unofficial start to the U.S. shopping season and is so called because many retailers turn profitable then.

Discounts at retailers aren’t crimping Hong Kong-based Li & Fung’s profitability, which is “trending up” in the second half of this year because of cost controls, Rockowitz said. He didn’t provide specific figures.

“Margins actually have been pretty good this year” as the company focuses on higher margin businesses, he said.

Li & Fung’s operating margin dropped to 2.95 percent in the first six months of 2011 from 4.96 percent a year ago, according to data compiled by Bloomberg.

Making Acquisitions

The shares of Li & Fung fell 0.7 percent to HK$14.20 as of 2:55 p.m. in Hong Kong trading. That compares with a 0.3 percent decline in the benchmark Hang Seng Index.

Li & Fung continues to look for acquisitions, Rockowitz said. “We’re taking advantage of this market where the economies are weak and people would like to be part of a bigger organization,” he said.

The company will consider purchases within the supply chain of beauty business as that will speed up its foray into the segment, Rockowitz said.

“We want to focus on areas that we are small, so, beauty is an area we’ll focus on looking for acquisitions,” he said, without identifying targets. “We’ll look at skincare, color cosmetics, and all parts of the supply chain.”

Li & Fung had $600 million available at the end of June for acquisitions and that amount gets replenished as sales expand, Rockowitz said. The company will set aside about 20 percent of its cash flow to fund purchases, he said.

First-half net income declined 15 percent to $236 million, beating the $206 million average of seven analysts’ estimates compiled by Bloomberg. Sales climbed 33 percent to $8.8 billion, Li & Fung said in August.

“Overall, it’s been a good year for the company,” Rockowitz said.

--With assistance from Anjali Cordeiro in Hong Kong. Editors: Lena Lee, Garry Smith

To contact the reporters on this story: Susan Li in Hong Kong at sli31@bloomberg.net; Vinicy Chan in Hong Kong at vchan91@bloomberg.net

To contact the editors responsible for this story: Frank Longid at flongid@bloomberg.net; Stephanie Wong at swong139@bloomberg.net


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