Li & Fung Limited

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COMPANY PROFILE
Li & Fung Limited
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Li & Fung Limited

TABLE OF CONTENTS
TABLE OF CONTENTS
Company Overview..............................................................................................3
Key Facts...............................................................................................................3
Business Description...........................................................................................4
History...................................................................................................................5
Key Employees.....................................................................................................9
Key Employee Biographies................................................................................10
Major Products and Services............................................................................15
Revenue Analysis...............................................................................................16
SWOT Analysis...................................................................................................17
Top Competitors.................................................................................................21
Company View.....................................................................................................22
Locations and Subsidiaries...............................................................................25
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Li & Fung Limited

Company Overview
COMPANY OVERVIEW
Li & Fung Limited (Li & Fung or the company), is a multinational consumer goods design,
development, sourcing and logistics company. It manages the supply chain for retailers and brands
worldwide. The company operates in the US, Europe, Asia and rest of the world. It is headquartered
in Hamilton, Bermuda and employed 25,781 people as of December 31, 2014.
The company recorded revenues of $19,288.5 million during the financial year ended December
2014 (FY2014), an increase of 1.4% over FY2013. The operating profit of the company was $723.6
million in FY2014, a decrease of 10.9% as compared to FY2013. The net profit of the company was
$441.3 million in FY2014, a decrease of 39.2% as compared to FY2013.
KEY FACTS
Head Office
Li & Fung Limited

Canons Court
22 Victoria Street
Hamilton HM 12
BMU
Phone
Fax
Web Address
http://www.lifung.com
Revenue / turnover 19,288.5

(USD Mn)
Financial Year End
December
Employees
25,781
Hong Kong Ticker
494
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Li & Fung Limited

Business Description
BUSINESS DESCRIPTION
Li & Fung is an asset-light supply chain management company engaged in providing consumer
goods design, development, sourcing and logistics services. The company specializes in supply
chain management of high-volume, time-sensitive goods for retailers and brands worldwide. It
operates through approximately 300 offices and distribution centers in more than 40 economies
spanning across the Americas, Europe, Africa and Asia.
The company conducts its business through two segments: trading network and logistics network.
The company's trading network focuses on provision of the global sourcing services via multiple
channels, such as buying agent, trading-as-principal for private label merchandise and on-shore
wholesale business. It provides sourcing services to retailers, brand owners and wholesalers to
support their brands on both an agency (commission margin) and a principal (product margin) basis.
It also offers design and products to retailers on a wholesale basis. The trading business covers a
wide range of consumer products, from softgoods (garments and apparel) to hardgoods (non-apparel
products such as toys, home furnishings, sporting goods, footwear, and health and beauty products).
It operates through network of around 15,000 suppliers in more than 40 economies.
The company's logistics network focuses on provision of logistics solutions and freight forwarding
services. It comprises of two businesses, in-country logistics and global freight management. The
in-country logistics offers Asia-focused logistics and supply chain solutions, and specializes in the
key verticals of footwear and apparel, fast-moving consumer goods, food and beverage, retail and
electronics. The global freight management offers cross-border logistics services at origin and
destination to supplement in-country logistics solutions and is particularly relevant for the company
to source customers. The company offers both full container loads and less-than container load
freight services.
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Li & Fung Limited

History
HISTORY
Li & Fung was founded in Guangzhou, China in 1906. Initially it traded largely in porcelain and silk
before diversifying into bamboo and rattan ware, jade, ivory, handicrafts and fireworks. Li & Fung
was established as a limited company in 1937 in Hong Kong.
The Second World War interrupted business following which the company ceased trading for several
years. Li & Fung began to export garments, toys, electronics and plastic flowers in addition to its
original product lines in 1949. The company was listed on the Hong Kong Stock Exchange in 1973.
The company was taken private in 1989. It was then restructured in two core businesses: export
trading and retail. In 1992, the export trading business was listed on the Hong Kong Stock Exchange.
In 1990s, the company started expanding through acquisitions. In 1995, Li & Fung acquired Inchcape
Buying Services and in 1999 further broadened its customer base in the US and Europe through
the acquisitions of Swire & Maclaine and Camberley Enterprises.
Li & Fung further expanded through the acquisition of Colby Group Holdings in 2000, and Janco
Overseas in 2002. In the following year, Li & Fung acquired the sourcing business of Firstworld
Garments and International Porcelain. Also in 2003, the company's wholly owned subsidiary acquired
the remaining one third of the equity interest in International Sourcing Group.
In 2004, Li & Fung signed a licensing agreement to manufacture and market clothing under the Levi
Strauss Signature label in the US. In the same year, the company acquired Ralsey Group, a
knitwear/sportswear company.
In 2005, the company and Daymon Worldwide, a private label food sales and marketing organization,
formed a strategic alliance to supply private label and Li & Fung licensed branded goods for
mass-market retailers worldwide. In the same year, the company acquired five companies: Comet
Feuerwerk, a fireworks group in Germany; PromOcean The Netherlands, a corporate premium and
promotional products supply group based in Europe; Briefly Stated Holdings, an apparel group in
the US with a portfolio of more than 40 character brand licenses; Young Stuff Apparel, an apparel
group focused on supplying private label products to mass-market retailers; and a hard goods agency
business sourcing primarily furniture based in Indonesia.
Li & Fung acquired Oxford Womenswear Group, a producer of private-label women's apparel
collections, in 2006. In the same year, RH&A Acquisition Corporation, a wholly-owned subsidiary of
Li & Fung, acquired Rosetti Handbags and Accessories. Later in the year, the company acquired
the sourcing arm of KarstadtQuelle, the department store and mail order business in Germany.
Subsequently, a partnership consisting of Rousso Apparel Group and Li & Fung acquired the assets
of GarfieldMarks.
In 2007, Li & Fung acquired the global sourcing operations of designer Tommy Hilfiger. In the same
year, the company acquired CGroup, a global supply-chain manager of health, beauty and cosmetic
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Li & Fung Limited

History
products for cosmetics brands and retailers worldwide. Subsequently, Li & Fung acquired Peter
Black International (PB Group), a supplier of footwear, accessories, gifts and personal care
merchandise for retailers in both the UK and Continental Europe.
Further in 2007, the company acquired Regatta, an apparel and brand management company.
Towards the end of 2007, Li & Fung acquired American Marketing Enterprises (AME), a children's
entertainment character licensed private label sleepwear company in the US. In 2008, the company
made seven acquisitions: Imagine, RT Sourcing, Silvereed, Wilson & Wong, Giant Merchandising,
Van Zeeland and Miles Fashion.
During 2008, Li & Fung and Liz Claiborne entered into a long-term, exclusive buying agency
agreement, whereby Li & Fung would act as the primary global apparel and accessories sourcing
agent for all brands in the Liz Claiborne portfolio, including Lucky Brand, Juicy Couture, Kate Spade,
and Liz Claiborne New York with the exception of the jewelry product lines. In the late 2009, the
Talbots and Li & Fung entered into a buying agency agreement wherein Li & Fung would serve as
the exclusive agent for substantially all Talbots apparel products.
Towards the end of 2009, LF USA, the wholly-owned subsidiary of the company, acquired all of the
assets of Wear Me Apparel, a designer, marketer and seller of men's and children's apparel in the
US. During the same period, the company entered into a global sourcing strategic partnership with
Hudson's Bay Trading Company for Hudson's Bay Trading Company's four main retail banners, the
Bay, Zellers, Home Outfitters and Lord & Taylor.
Li & Fung opened a new 7,100 square meter hub in Istanbul at the start of 2010 for the company's
sourcing business in Europe, the Mediterranean, Middle East, Northern Africa and the former Soviet
Union republics. In the same period, the company entered into a non-exclusive sourcing arrangement
with Wal-Mart Stores to supply $2 billion worth of goods in the first financial year of operations.
Subsequently, the company acquired the entire issued share capital of Visage Group, a private-label
apparel supplier to leading high street and mass retailers in the UK.
During the mid of 2010, the company signed seven deals. These deals included three acquisitions
related to health, beauty and cosmetics (HBC) sector, jeans wear, and US onshore businesses
respectively, as well as four licensing deals. The three acquisitions included Jackel Group, Hong
Kong-based HTP Group and Cipriani Accessories and its affiliate, the Max Leather Group.
Integrated Distribution Services Group (IDS Group) became a wholly-owned subsidiary of the
company in the late 2010. Further during the same period, Li & Fung acquired US-based Jimlar, a
designer, distributor and supplier of footwear in the US and manufactures footwear under license
for Coach and Calvin Klein, as well as for its own brands Frye, Mountrek and RJ Colt.
Towards the end of 2010, the company signed a sourcing agreement with Li Ning Company. Under
the terms of the agreement, Li & Fung would become a sourcing agent for Li Ning Company's brands
in both international and domestic markets. In the same period, the company's subsidiary LF USA
acquired substantially all of the assets of Oxford Apparel for approximately $121.7 million.
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Li & Fung Limited

History
In 2011, Li & Fung acquired Beyond Productions, a designer and licensor of women's fashion apparel
and accessories. Later in the mid of 2011, the company announced signing of five deals, which
included three acquisitions for the company's trading network and two acquisitions for its distribution
network. The new additions to Li & Fung's trading network included the acquisitions of Loyaltex
Apparel, Collection 2000 and Exim Designs. In addition, the company acquired TVMania and
Hampshire Designers for its distribution network.
In the end of 2011, LF USA entered into a strategic partnership with the Council of Fashion Designers
of America (CFDA) to become its member. The partnership will also include business programs that
will give back to CFDA. In the same period, the company entered into a multi-year licensing agreement
with Geoffrey Beene for men's pants including casual, dress and shorts, under the Geoffrey Beene
label for the US and Canada.
Further in 2011, Li & Fung signed master license agreement with USPA - U.S. Polo Association.
According to the agreement, Li & Fung Asia will take over the management of the USPA brand in
China, Hong Kong and Macau including all hardgoods and softgoods for the trademark of USPA.
During 2012, the company acquired the children apparel and toys businesses in Greater China from
Roly Group. In the mid of 2012, Li & Fung entered into an outsourcing agreement with Target
Australia, an Australian department store chain. The arrangement covers both softgoods and
hardgoods.
In the late 2012, the company entered into a new agency agreement with Wal-Mart Stores that
supersedes the previous buying agency agreements made in 2010. Under the new agency agreement,
DSG (Direct Sourcing Group) would continue as the primary direct resource for Sam's Club in the
US and continue to provide buying agency services to Walmart US and certain Walmart International
markets on a category-specific basis.
In 2013, the company acquired Lornamead Acquisitions Limited which owns and manages a portfolio
of traditional and heritage US, German and the UK personal care brands, such as Finesse, CD,
Aqua Net, Yardley and Lypsyl, across hair, body, skin and oral care product categories. In the same
year, the company acquired Four Star Group, a pharmaceutical and medical device distributor in
Macau.
In the same year, Li & Fung acquired Group A Limited, a UK based point-of-sale business which is
primarily operating in the beauty business. During the same period, the company acquired a
transportation company in Taiwan, Chuan Jui Group which focuses on hypermarket, consumer and
retail channels.
In the same year, the company acquired Whalen Furniture, a furniture and furnishing trading company
servicing the US mass retailers with its own proprietary brands as well as private label business. In
the same year, Li & Fung acquired RM Enterprises Group, a licensing agency for the development
and promotion of character licensing in Greater China, South Korea, Japan and South East Asia.
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Li & Fung Limited

History
In the same year, the company acquired New Concept, a soft home company with nationwide
distribution in China. In the same period, Li & Fung acquired Jiangsu Soho which is a licensee and
distributor of Jeep Kids brand in China.
In the same year, the company acquired Sicem, a licensing company specialized in character licenses
in Italy. In addition, the company acquired R-Tsion, the exclusive sales agent for TV Mania in France.
In the same year, Li & Fung acquired a Canadian-based woman footwear company, Marvin Krasnow
Enterprises which is specialized in weatherproof, stain resistant technology in Italian leather and
suede.
In January 2014, Li & Fung created a new business unit to focus more intensely on factory and
worker safety following tragedies in the garment industry, as well as the on-going needs of its global
vendor base.
In July 2014, the company completed the spin-off and separate listing of global brands group (GBG)
on the main board of the stock exchange of Hong Kong limited.
In June 2015, Li & Fung announced a strategic partnership with Shanghai Bailian Group Co. and
Beijing Wangfujing Department Store, with the establishment of a joint venture in the Shanghai free
trade zone.
In September 2015, Li & Fung opened a new LEED Platinum certified research and development
facility in Thailand.
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Li & Fung Limited

Key Employees
KEY EMPLOYEES
Name
Job Title
Board
Compensation
Spencer Theodore Fung
Group Chief Executive Officer
Executive Board
1747000 USD
Marc Robert Compagnon
Executive Director and President of Executive Board

LF Sourcing
4713000 USD
Victor Fung Kwok King
Honorary Chairman
Non Executive Board
65000 USD
William Fung Kwok Lun
Group Chairman
Non Executive Board
3169000 USD
Paul Edward Selway-Swift
Independent Non Executive Director Non Executive Board
69000 USD
Allan Wong Chi Yun
68000 USD
Margaret Leung Ko May Yee
59000 USD
Martin Tang Yue Nien
64000 USD
Edward Lam Sung Lai
Chief Financial Officer
Non Executive Board
Manuel Fernandez
Group Chief Technology Officer
Non Executive Board
Lale Kesebi
Chief Communications Officer and

Head of Strategic Engagement
Senior Management
Rick Darling
Executive Director of Government

and Public Affairs
Senior Management
Emily Mak Mok Oi Wai
Chief Administrative Officer
Senior Management
Gerard Jan Raymond
President of LF Asia and LF Beauty Senior Management
Annabella Leung Wai Ping
President of LF Fashion
Senior Management
Henry Chan
President of LF Products
Senior Management
Stephen Lister
President of LF Private Label
Senior Management
Joseph Phi
President of LF Logistics
Senior Management
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Li & Fung Limited

Key Employee Biographies
KEY EMPLOYEE BIOGRAPHIES

Spencer Theodore Fung
Board: Executive Board
Job Title: Group Chief Executive Officer
Since: 2014
Age: 41
Mr. Fung has been the Group Chief Executive Officer at Li & Fung since 2014. He serves as an
Independent Non Executive Director at Swire Properties. Mr. Fung serves as a Director at Young
Presidents Organization. He joined the Fung Group in 2001 and served as the Group Chief Operating
Officer and President of LF Europe at Li & Fung.
Marc Robert Compagnon

Board: Executive Board
Job Title: Executive Director and President of LF Sourcing
Since: 2014
Age: 56
Mr. Compagnon has been the Executive Director at Li & Fung since 2014. He also serves as the
President of LF Sourcing at Li & Fung. Mr. Compagnon serves as the Non Executive Chairman at
TheAbacaGroup, a hotel and restaurant management group. Mr. Compagnon is a Founding Member
at Cottons Revolutions.
Victor Fung Kwok King

Board: Non Executive Board
Job Title: Honorary Chairman
Since: 2012
Age: 69
Mr. King has been the Honorary Chairman at Li & Fung since 2012. He serves as the Chairman of
the Risk Management and Sustainability Committee at Li & Fung. Mr. King serves as a Director at
King Lun Holdings and Fung Holdings. He serves as an Independent Non Executive Director at
Chow Tai Fook Jewellery Group, Koc Holding and China Petrochemical.
William Fung Kwok Lun

Job Title: Group Chairman
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Li & Fung Limited

Since: 2012
Age: 66
Mr. Lun has been the Group Chairman at Li & Fung since 2012. He serves as a Non Executive
Director at various companies within the Fung Group, including Convenience retail Asia and trinity.
Mr. Lun serves as the Chairman and Non-Executive Director at Global Brands Group Holding. He
serves as a Director at King Lun Holdings and its wholly owned subsidiary, Fung Holdings. Mr. Lun
serves as an Independent Non Executive Director at VTech Holdings, Shui On Land, Sun Hung Kai
Properties, The Hongkong and Shanghai Hotels and Singapore Airlines.
Paul Edward Selway-Swift

Job Title: Independent Non Executive Director
Since: 1992
Age: 70
Mr. Swift has been an Independent Non Executive Director at Li & Fung since 1992. He also serves
as the Chairman of Nomination Committee at Li & Fung. Mr. Swift serves as an Independent Non
Executive Director at Global Brands Group Holding. He serves as the Chairman at Pure Circle, a
producer of natural food ingredients. Mr. Swift served as the Deputy Chairman at HSBC Investment
Bank. He also served as a Director at The Hongkong and Shanghai Banking Corporation and
Temenos Group.
Allan Wong Chi Yun

Since: 1999
Age: 64
Mr. Yun has been an Independent Non Executive Director at Li & Fung since 1999. He serves as
the Chairman of Remuneration Committee at Li & Fung. Mr.Yun serves as the Chairman and Group
Chief Executive Officer at VTech Holdings. He Co-founded VTech Group in 1976. Mr. Yun serves
as the Deputy Chairman and Independent Non Executive Director at The Bank of East Asia. He
serves as an Independent Non Executive Director at China-Hong Kong Photo Products Holdings,
and the MTR Corporation.
Margaret Leung Ko May Yee

Since: 2013
Age: 62
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Li & Fung Limited

Ms. Yee has been an Independent Non Executive Director at Li & Fung since 2013. She serves as
the Chairman of Audit Committee at Li & Fung. Ms. Yee serves as the Deputy Chairman, Managing
Director and an Executive Director at Chong Hing Bank. She also serves as an Independent Non
Executive Director at First Pacific Company and Sun Hung Kai Properties. Ms. Yee also serves as
an Independent Non Executive Director at Hong Kong Exchanges and Clearing, QBE Insurance
Group and China Construction Bank. She served as the Vice Chairman and Chief Executive Officer
at Hang Seng Bank and also as the Chairman at Hang Seng Bank (China).
Martin Tang Yue Nien

Since: 2009
Age: 65
Mr. Nien has been an Independent Non Executive Director at Li & Fung since 2009. He serves as
an Independent Non Executive Director at CEI Contract Manufacturing and China NT Pharma Group
Company. Mr. Nien was previously the Chairman of Asia at Spencer Stuart and Associates, a global
executive search consulting firm.
Edward Lam Sung Lai

Job Title: Chief Financial Officer
Since: 2012
Age: 48
Mr. Lai has been the Chief Financial Officer at Li & Fung since 2012. He serves as a Member of the
Takeovers and Mergers Panel of Securities and Futures Commission of Hong Kong. Mr. Lai has 20
years of experience in banking, finance, and accounting. Prior to joining Li & Fung, he served in
Senior Corporate and Investment Banking positions at Citi and Morgan Stanley. He has also practiced
Public Accounting at Coopers & Lybrand.
Manuel Fernandez
Job Title: Group Chief Technology Officer
Since: 2006
Mr. Fernandez has been the Group Chief Technology Officer at Li & Fung since 2006. He is the
Head of Global Transactional Services at Li & Fung. Mr. Fernandez served as the Regional IT
Manager of Strategic Applications at Li & Fung Distribution Group. He also served as the Chief
Information Officer at Integrated Distribution Services Group from 2001 to 2006.
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Li & Fung Limited

Lale Kesebi
Board: Senior Management
Job Title: Chief Communications Officer and Head of Strategic Engagement
Ms. Kesebi currently serves as the Chief Communications Officer at Li & Fung. She is the Head of
Strategic Engagement at Li & Fung. Ms. Kesebi joined Li & Fung in 2003 and currently serves as
the Chairman of Corporate Sustainability Committee. She serves as the Co-Chairman of the Alumni
Network Steering Committee at The Womens Foundation in Hong Kong.
Rick Darling
Job Title: Executive Director of Government and Public Affairs
Mr. Darling currently serves as the Executive Director of Government and Public Affairs at Li & Fung.
He serves as a Board Member at the American Apparel and Footwear Association. Mr. Darling
founded The Millwork Trading which was acquired by Li & Fung in 1999.
Emily Mak Mok Oi Wai

Job Title: Chief Administrative Officer
Ms. Wai currently serves as the Chief Administrative Officer at Li & Fung. She served as the President
at LF USA Sourcing and manages all its Asia operations. Ms. Wai joined Li & Fung in 2000 with the
acquisition of Colby International.
Gerard Jan Raymond

Job Title: President of LF Asia and LF Beauty
Mr. Raymond currently serves as the President of LF Asia and LF Beauty at Li & Fung. He served
as an Executive Vice President of Distribution and Regional Managing Director at Integrated
Distribution Services Group Limited.
Annabella Leung Wai Ping

Job Title: President of LF Fashion
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Li & Fung Limited

Ms. Ping currently serves as the President of LF Fashion at Li & Fung. She served as an Executive
Director at Li & Fung from 2000 to 2010. Ms. Ping was formerly the Regional Director of North Asia
Apparel at Inchcape, a global sourcing network which was acquired by Li & Fung in 1995.
Henry Chan
Job Title: President of LF Products
Mr. Chan currently serves as the President of LF Products at Li & Fung. He joined Li & Fung in 1972
and served as an Executive Director of the company from 1992 to 2009. Mr. Chan is a Member at
The Hong Kong institute of directors and the Advisory Board of the MBA programs of the Faculty of
Business Administration at The Chinese University of Hong Kong.
Stephen Lister
Job Title: President of LF Private Label
Mr. Lister currently serves as the President of LF Private Label at Li & Fung. He served as the Chief
Operating Officer and the President at LF Europe. Mr. Lister served as the Group Chief Executive
Officer at Peter Black Holdings.
Joseph Phi
Job Title: President of LF Logistics
Mr. Phi currently serves as the President of LF Logistics at Li & Fung. He serves as the Chairman
and Director at GS1 Hong Kong. Mr. Phi joined Li & Fung in 1999 and served as its Executive Director
of Integrated Distribution Services Group Limited from 2004 to 2011.
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Li & Fung Limited

Major Products and Services
MAJOR PRODUCTS AND SERVICES

Li & Fung is a multinational consumer goods design, development, sourcing and logistics company.
The company's key services include the following:
Services:
Product design and development
Raw material sourcing
Production planning and management
Factory sourcing
Shipping
Forwarder consolidation
Customs clearance
Local forwarding consolidation
Shipping consolidation
Warehousing
Distribution center management
Transport management
Customs brokerage
Freight forwarding
Supply chain analytics
Research, design and logistical advice
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Li & Fung Limited

Revenue Analysis
REVENUE ANALYSIS
Overview
The company recorded revenues of $19,288.5 million during the financial year ended December
2014 (FY2014), an increase of 1.4% over FY2013. In FY2014, the US, the company's largest
geographic market, accounted for 60.1% of the total revenues.
Li & Fung generates revenues through two business segments: trading network (95.5% of the total
revenues in FY2014 before eliminations) and logistics network (4.5%).
Revenues by Segment
In FY2014, the trading network segment recorded revenues of $18,430.8 million, a decrease of 0.5%
as compared to FY2013.
The logistics network segment recorded revenues of $873.6 million in FY2014, an increase of 66%
over FY2013.
Revenues by Geography
The US, Li & Fungs largest geographical market, accounted for 60.1% of the total revenues in
FY2014. Revenues from the US reached $11,587.1 million in FY2014, an increase of 0.1% over
FY2013.
Europe accounted for 18.1% of the total revenues in FY2014. Revenues from Europe reached
$3,488.1 million in FY2014, a decrease of 1.2% as compared to FY2013.
Asia accounted for 14.2% of the total revenues in FY2014. Revenues from Asia reached $2,744.3
million in FY2014, an increase of 14.3% over FY2013.
Rest of the world accounted for 7.6% of the total revenues in FY2014. Revenues from rest of the
world reached $1,469 million in FY2014, a decrease of 3.4% as compared to FY2013.
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Li & Fung Limited

SWOT Analysis
SWOT ANALYSIS
Li & Fung is a multinational consumer goods design, development, sourcing and logistics company.
The companys extensive operational network enables it to source its goods from various locations
and distribute it in different countries thus reducing the business risk. However, long term changes
in currency exchange rates could have major impact on the company's financial results.
Strengths
Weaknesses
Extensive operational network

Robust presence across the sourcing value
chain
Largely dependent on few customers

High dependence on the US for business
Opportunities
Threats
Strong outlook for the global ecommerce

market
Spin-off and separate listing of Global
Brands Group
Foreign currency risk

Changing regulation
Intense competition
Strengths
Extensive operational network

Li & Fung operates globally through an extensive operational network. The company operates
through more than 300 offices and distribution centers in more than 40 economies spanning across
the Americas, Europe, Africa and Asia. Through this network, Li & Fung has an access to a sourcing
network of about 15,000 suppliers. The company's network extends outside Asia and into other
markets, including the US, Europe, Canada, Australasia, Central and Latin America, and South
Africa.
In addition, Li & Fung has an extensive logistics network around the world that offers a comprehensive
set of logistics solutions. The company's logistics network focuses on provision of logistics solutions
and freight forwarding services to key verticals of footwear and apparel, fast-moving consumer
goods, food and beverage, retail and electronics. The global freight management offers cross-border
logistics services at origin and destination to supplement in-country logistics solutions and is
particularly relevant for the company to source its customers.
Hence, an extensive operational network enables the company to source its goods from various
locations and distribute it in different countries thus reducing the business risk.
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Li & Fung Limited

SWOT Analysis
Robust presence across the sourcing value chain

The company has robust presence across the sourcing value chain, from initial conceptualization
to delivery of finished products. In the initial stages, the company works closely with customers,
assessing their needs and using market research, retail and fashion trend forecasts, and innovative
technology to design the right supply chains. Further it also helps customers in conceptualizing
products, brainstorming, designing and prototyping. Li & Fung also works with over 15,000 suppliers
in multiple ways to meet its customers needs. The company also operates leading-edge systems
and programs to help its customers meet quality needs, industry standards and local requirement.
Lastly, the company offers a customizable menu of logistics solutions, from warehousing, transport,
repacking, customs brokerage, freight forwarding, hubbing and consolidation, and other value-added
services to make appropriate delivery.
The companys presence across the sourcing value chain enables it to offer complete solutions,
thus enabling it to attract new customers and boost topline performance.
Weaknesses
Largely dependent on few customers

Li & Fung derives a significant portion of its revenues from few key customers. During FY2014,
approximately 14% of the company's turnover is derived from a single external customer. Also, the
percentage of sales attributable to the company's five largest customers combined was around 35%
of its total sales in FY2014. Overdependence on few customers for majority of revenues reduces
bargaining power of the company as the customers can use their financial strength to press for
unfavorable terms and conditions for business. Also, the loss of one or more of these customers
could have a material adverse effect on the company, as a whole, or on the respective segment in
which the customer's sales are reported.
High dependence on the US for business
Although Li & Fung has presence in Latin America, Europe, Africa and Asia, it depends on the US
markets for a major part of its revenues. In FY2014, the US, the company's largest geographic
market, accounted for approximately 60.1% of the total revenues. This heavy dependence on the
US may have a dampening effect on the company's revenues if the economy or the company's
business in the US does not grow as expected.
High dependence on a single country makes the company susceptible to changes associated with
the economic and political situation of the country. The company's high reliance on one market thus
exposes it to the risk of downturns in the country's macroeconomic conditions and amplifies its
business risk.
Opportunities
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Li & Fung Limited

SWOT Analysis
Strong outlook for the global ecommerce market

The outlook for the global ecommerce market is robust. According to industry estimates, global
ecommerce spending is expected to reach $1.672 trillion in 2015, which accounted for 7.3% of the
overall global retail sales, which are expected to be $22.822 trillion in 2015. Furthermore, the market
is expected to reach $3.551 trillion, or 12.4% of total retail sales by 2019, representing a compound
annual growth rate (CAGR) of 20.7% for the 2014-19 periods.
The company is well positioned to benefit from the booming global e-commerce market. Li & Fung
specializes in supply chain management of high-volume, time-sensitive goods for retailers and
brands worldwide.The company covers a wide range of consumer products, from softgoods (garments
and apparel) to hardgoods (non-apparel products such as toys, home furnishings, sporting goods,
footwear, and health and beauty products). Therefore the companys distribution business could
grow significantly due to the growth in the global demand for luxury. Which would lead to an increase
in Li & Fung's revenues and profits.
Spin-off and separate listing of Global Brands Group
Li & Fung completed the spin-off and separate listing of Global Brands Group on the Main Board of
the Stock Exchange of Hong Kong. The company has reorganized the distribution network by aligning
the private label business to the trading network and creating the new standalone Global Brands
Group (GBG), which consists of the brands and licensing businesses.
Given the separate needs and different business models of Li & Fung and GBG, creating two
companies will enable the management of each to pursue their own specific and focused strategy.
Li & Fung will be able to concentrate on its sourcing and logistics business, which requires sourcing
skills and product development and supply chain management for retailers and brands globally. On
the other hand, DBG requires fashion-forward design capabilities as well as brand development,
licensing, and marketing skills.
For Li & Fung, this will allow for a simplification of the business and will help the company streamline
operations into its core areas. Li & Fung will also continue to benefit from GBG's growth through a
seven year sourcing agreement. For GBG, an uninterrupted focus on the brands business will allow
its management team to fully build out the business.
Thus, separating Li & Fung and GBG into two distinct companies is expected to deliver meaningful
benefits to each of the businesses, its customers, and its shareholders.
Threats
Foreign currency risk
Li & Fung Limited

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Li & Fung Limited

SWOT Analysis
The company is subject to exchange rate fluctuations which could impact its margins. Most of Li &
Fung's cash balances were deposits in Hong Kong dollar (HK$) and US dollar with major global
financial institutions, and most of the company's assets, liabilities, revenues and payments were
held in either HK$ or US dollar. Fluctuation of relevant currencies against the US dollar will result in
unrealized gain or loss from time to time, which is reflected as movement in exchange reserve in
the consolidated statement of changes in equity. The company is exposed to currency fluctuation
on operating costs in sourcing countries such as China, Bangladesh, Vietnam, Korea and India to
a certain extent.
Hence, long term changes in currency exchange rates could have major impact on the company's
financial results.
Changing regulation
The company is subject to regulatory changes in the countries that it conducts its business in. For
instance, China has changed policies to promote domestic consumption as a more sustainable
growth engine for the future. Part of this policy change is to increase wages dramatically in this
Five-Year Plan (20112015). This has resulted in a substantial decanting of lower value-added
production out of China to less developed markets. This trend will complicate the supply chain
process and disconnect raw material infrastructure in China from actual production countries. Since
the company conducts its business in China it could be effected by this change which could have
an impact on its overall revenues.
Intense competition
The company operates in highly competitive sourcing and logistics industry. The company face
competition from other players in the industry, which have higher volume and greater geographic
reach. The companys key competitors are Global Sources, William E. Connor & Associates and
APL logistics Americas. Hence, extensive competition could prevent implementation of price increases
and could force the company to reduce prices, which may impact the bargaining power of the
company and strain its margins.
Li & Fung Limited

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Li & Fung Limited

Top Competitors
TOP COMPETITORS
The following companies are the major competitors of Li & Fung Limited
Global Sources Ltd.

APL Logistics
William E. Connor & Associates Ltd
Li & Fung Limited

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Li & Fung Limited

Company View
COMPANY VIEW
A statement by William Fung Kwok Lun, the Group Chairman at Li & Fung Limited, is given below.
The statement has been taken from the company's 2014 annual report.
Year of Transition
2014 was a year of transition as we spun-off our brands and licensing business (Global Brands) to
be a separately listed entity. The spin-off allows Li & Fung to simplify and focus on our core business
as a pure play supply chain management company. As part of this transition, Spencer Fung, our
COO, assumed the role of Group CEO of Li & Fung, effective July 2014.
Given our scale and the breadth of the vendor network we have built over several decades, together
with unparalleled local market knowledge and market analysis capabilities, Li & Fung continues to
be the worlds leading global supply chain manager. In addition, our Logistics business offers logistics
solutions across Asia both within-country as well as global freight forwarding. With the acquisition
of China Container Line (CCL) in March last year, we have strengthened our freight forwarding
capabilities. CCLs container volume provides us with the leverage to negotiate competitive freight
rates with all the major global shipping lines and allows us to cross-sell these services to Li & Fung
customers in a more scalable and price-competitive manner.
Following the Global Brands spin-off, Li & Fung has returned to its earlier business model of strong
cash flow generation, less volatility on earnings and a strong balance sheet. Going forward, we will
continue to evaluate the changing dynamics of the consumer goods industry and allocate capital
where necessary to invest in high growth and underserved areas.
Year of Investment
2014 was the first year of our current Three-Year Plan (2014-2016). As with previous three-year
plans, the first year is always an investment year. To strengthen our platform to drive organic growth
and build a sustainable enterprise, we increased our spending on several growth initiatives such as
expanding our logistics platform, initiating Vendor Support Services to help our vendors, enhancing
our existing people infrastructure to match our expanding business, as well as expanding our product
categories, and entering new geographies to build new vendor bases and customer relationships.
Performance
In 2014, global retail sales were tepid and marked by a highly promotional environment. Retail sales
in the United States fared better than other regions due to higher levels of discounts and promotions,
but this put pressure on margins for our customers and correspondingly on our Principal Trading
business. In the closing weeks of 2014, we saw some early signs of recovery as sales in the US,
aided by the sudden decline in oil prices, picked up towards the end of the Christmas selling period.
Europe remained challenging. Geopolitical turmoil and the drop in oil prices had a negative impact
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Li & Fung Limited

Company View
on Russian and Central European consumers. That in turn has affected our European customers
who had previously relied on Russia as their fastest growing market. In addition, the advent of
quantitative easing in Europe will lead to a drop in the Euro exchange rate which may further
negatively impact European buyers. Asia was impacted by geopolitical events in Thailand, Vietnam,
China and Hong Kong, which slowed consumer spending. Given the challenging environment,
turnover increased by 1% while our total margin was down 2%. As with previous three-year plans,
investments made in the first year resulted in an increase in operating costs and this held true for
2014 as we geared up to reach our Three- Year Plan targets. Core operating profit decreased 18%
to US$604 million. Profit attributable to Shareholders (excluding the loss from Global Brands)
decreased by 12% to US$539 million. The Board has resolved to declare a final dividend of 21 HK
cents and a special dividend of 7 HK cents per share.
Key Challenges and Opportunities
Escalating minimum wages in China will continue to transition the production base to manufacturing
higher-value products. While the recent drop in oil and commodity prices has slowed the expected
production migration out of China, new frontier regions such as Myanmar and Africa have started
to develop production bases and will be competitors for future orders. As pioneers in managing
global supply chains, we will continue to expand our global production network to help customers
diversify their production bases and, through the application of our standards and capacity-building
initiatives, support the sustainable development of these supply chains.
Over the course of 2014, we have been building our Vendor Support Services team to offer a new
array of services such as procurement support, compliance capabilities, product testing and trade
credit services, to our base of over 15,000 vendors. This initiative is targeted to provide services to
the vendor community, which has been an underserved market segment. These services are
underpinned by our Vendor Portal, which is the data and information center for our vendors, and
has and will continue to improve the efficiency of the whole supply chain in a data-driven manner.
The growth of e-commerce continues to accelerate and end consumers are demanding that their
browsing, buying and merchandise-returning needs be met in both offline and online experiences.
To tackle this challenge, both the e-commerce pure plays and brick-and-mortar retailers are merging
to compete with an omni-channel strategy. We are a supply chain facilitator, regardless of our
customers selling channels. When we source products for our customers, these products are for
both online and offline distribution. The distribution centers and stores have become the main stock
room, where products are sorted for both store distribution and direct-to-consumer delivery. Over
the past decade, we have anticipated this trend and designed better means of packaging our products
before they leave the production regions and our e-logistics capabilities are amongst the best in the
region. We also see that online retailers would increasingly want their own private labels to capture
more value from the traffic their distribution platforms bring and to differentiate themselves from their
competitors. In many respects, their buying requirements closely resemble those of our fast fashion
customers. Both require supply chain providers to offer a wide variety of designs, in small order lots,
with short delivery times. In this respect, we are the leading supplier for brands and private labels
in the world for our product categories.
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Li & Fung Limited

Company View
Prospects
Entering into 2015, we are seeing some early signs of recovery in consumer spending in the US
due to improved consumer confidence and the fall in oil prices. However, the uncertainties in the
Eurozone mentioned above still persist and Asia poses a macro concern and headwind for the other
consumer markets. Overall, we are cautious about 2015. We will continue to focus on growing our
trading business organically by increasing market share with existing customers and winning new
customers. Our logistics services will continue to grow strongly on the back of winning new mandates
from new customers and from cross-selling to Li & Fungs trading customers. We will continue to
nurture our Vendor Support Services business to support our suppliers to enhance operational
efficiencies, improve working conditions and innovate for systematic and sustainable change. In
closing, I would like to thank all my colleagues for their dedication and hard work over the past year.
Li & Fung Limited

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Li & Fung Limited

Locations and Subsidiaries
LOCATIONS AND SUBSIDIARIES

Head Office
Li & Fung Limited
Canons Court
22 Victoria Street
Hamilton HM 12
BMU
http://www.lifung.com
Other Locations and Subsidiaries

Li & Fung Limited
11th Floor
LiFung Tower
888 Cheung Sha Wan Road
Kowloon
HKG
Phil Henson GmbH

DEU
PromOcean Spain SL
ESP
Ralsey Group Limited

USA
TVMania UK Limited
GBR
Texnorte Industrial Limited

HKG
Shiu Fung Fireworks Trading (Changsha)

Limited
CHN
PT Direct Sourcing Indonesia

IDN
PromOcean France SAS

FRA
Wilson Textile Limited

HKG
Li & Fung Limited

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Li & Fung Limited

Li & Fung Limited

Revenue / turnover 19,288.5

Hong Kong Ticker

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Li & Fung Limited

Spencer Theodore Fung

Group Chief Executive Officer

Marc Robert Compagnon

Executive Director and President of Executive Board

Victor Fung Kwok King

Non Executive Board

William Fung Kwok Lun

Non Executive Board

Paul Edward Selway-Swift

Independent Non Executive Director Non Executive Board

Allan Wong Chi Yun

Independent Non Executive Director Non Executive Board

Margaret Leung Ko May Yee

Independent Non Executive Director Non Executive Board

Martin Tang Yue Nien

Independent Non Executive Director Non Executive Board

Edward Lam Sung Lai

Chief Financial Officer

Non Executive Board

Group Chief Technology Officer

Non Executive Board

Chief Communications Officer and

Executive Director of Government

Emily Mak Mok Oi Wai

Chief Administrative Officer

Gerard Jan Raymond

President of LF Asia and LF Beauty Senior Management

Annabella Leung Wai Ping

President of LF Private Label

Li & Fung Limited

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Li & Fung Limited

KEY EMPLOYEE BIOGRAPHIES

Marc Robert Compagnon

Victor Fung Kwok King

Li & Fung Limited

Li & Fung Limited