The world’s largest middleman isn’t faring so well

By Lily Kuo @lilkuo 7 hours ago

Garment workers in Cambodia. Reuters/Samrang Pring

 

The numbers: Not amazing. Hong Kong-based Li & Fung, which connects retailers to suppliers around the globe, saw first half-profit rise 16% to $111.4 million (pdf). Sales at the world’s biggest middleman rose 3% to $8.71 billion, slightly missing analysts’ estimates of $8.73 billion. Operating profits fell 9% to $227 million.

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The takeaway: Li & Fung, which works with retailers including Walmart, Target, and Kohl’s, is something of a bellwether for global retail, and an especially good indicator of the US retail landscape. Lackluster earnings at Li & Fung may mean that US retail still struggled for the first half of the year, despite a slowly recovering economy. The fact that the company spun off its brands-management unit earlier this year to focus on its core business of supplying clothes and toys may have also affected its earnings.

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What’s interesting: Some retailers , such as the children’s clothing company Carter’s and Walmart, have considered cutting out middlemen like Li & Fung to work with suppliers themselves, but growing anxiety over the safety of garment factories in Bangladesh and elsewhere could bring more business to Li & Fung. The company set up a safety consulting unit to advise factories. Concerned retailers “will feel more comfortable about using a sourcing agent that makes guarantees and performs checks” on factories, Aaron Fischer, an analyst at CLSA Asia-Pacific Markets, told the Wall Street Journal.