Li Fung Group, owner of Sonia Rykiel and Gieves Hawkes, issues profit warning
FUNG Group, owners of Sonia Rykiel, Cerruti 1881 and Gieves & Hawkes has issued a profit warning stating that the annual net profit in 2012 will not exceed that in 2011, when net profit of $4.27 billion was recorded. The Company stated the core operating profit is expected to be lower by approximately 40% (compared to the corresponding period in 2011).
With 60 percent of Li & Fung’s sales destined for U.S.-based retailers, the company said the turnaround of LF USA’s business had been slower than expected, leading to a drop in core operating profit for the first half of 2012. Last August, the exporter said half-year core operating profit fell 22 percent due to a slower-than-expected turnaround of its U.S operations and weak demand in Europe, though January-June net profit rose by a third as it booked write-backs on two 2010 acquisitions.
The Hong Kong-based company said the ongoing restructuring of LF USA’s business includes a reduction in the number of brands distributed in the United States, which had negatively impacted its margins, while its efforts to improve second-half results would not achieve an improvement in core operating profit.