A lackluster retail market is likely to hinder Li & Fung Ltd. (00494.HK) in its efforts to achieve its three-year plan, the Hong Kong Economic Journal reported Friday.
The trading and logistics firm had set a goal of doubling the core operating profit of its logistics business by next year from 2013, and returning that of its trading arm to its peak level that year.
Chairman William Fung Kwok-lun said the goals were set way too high and have turned out to be difficult to accomplish, given the changes in the retail environment over the past year.
Li & Fung posted a 39.1 percent decline in net profit last year to US$440 million.
Core operating profit slid 18 percent to US$604 million.
The results fell short of market estimates.
Clients on the retail front were offering promotional discounts all year in 2014, while the proportion of revenue from the more lucrative short-term trading business was decreasing, Li & Fung said.
Those factors combined caused the trading division’s gross profit margin to drop 0.4 percentage point and core profit to tumble 20.4 percent, it said.
Still, the group does not plan to amend its three-year plan.
Chief executive Spencer Fung said that in contrast to the firm’s poor overall performance, the core profit of its logistics business rose 28.1 percent, driven by the Asian courier market.
The mainland China market will continue to grow, with a relatively fast expansion in the e-commerce sector, he said.
Translation by Vey Wong
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