27
Fashion Jobs
By
Reuters
Published
Jun 10, 2009
Reading time
2 minutes
Download
Download the article
Print
Text size

Arcandor insolvency to hit Li & Fung 3 year plan

By
Reuters
Published
Jun 10, 2009


Li & Fung


HONG KONG, June 10 (Reuters) - Leading global consumer goods exporter Li & Fung (0494.HK) on Wednesday 10 June said the insolvency of one of Germany's biggest retailers, Arcandor (AROG.DE), would impact the company's three-year plan to boost sales to $20 billion.

Arcandor threw in the towel on Tuesday 9 June, filing for insolvency after the German government rejected its pleas for emergency state aid.

Arcandor accounted for 5-6 percent, or around $700 million, of the company's 2008 sales revenue, but its contribution in 2009 had been on the decline, Li & Fung group managing director William Fung told Reuters in a telephone interview speaking from New York.

"I think we have to work hard to sign more deals. We have been successful with the Liz Claiborne deal and we have a couple of other deals we are working on, in fact that is why I'm here," said Fung.

In February, Li & Fung agreed to pay $83 million to become Liz Claiborne's (LIZ.N) primary sourcing agent for apparel and accessories. Late in April, the company said it expected to sign an outsourcing deal with loss-making U.S. retailer Talbots Inc (TLB.N) within the next 45 days.

"We are hopeful we can make up for some of these unfortunate losses in our turnover," he said.

Fung, said he was working on a potential deal with an American company, and said the company would work to fullfil its three-year plan through acquisitions and outsourcing deals in the U.S. and Europe.

Li & Fung, which is a buying agent for Arcandor, including its Karstadt, Primondo and Quelle businesses, earlier on Wednesday 10 June said the German company owed it around $5.4 million in outstanding agency commissions.

Fung said Arcandor was a big customer for Li & Fung, which derives 25 percent of its revenue from Europe.

"But because they are a big customer, the commission they pay is also quite low ... it is a typical high-volume, low-margin business," he said.


The company may also have to make provisions for a part of the goodwill related to its 2006 acquisition of the sourcing business of Karstadt's, Arcandor's department store chain, Fung said. Third-party customers of Karstadt's sourcing business remain unaffected by the Arcandor insolvency, so that portion of the intangible assets will not be impacted, he said.

"It is early days yet, but if they go into final liquidation, the portion that relates to Arcandor business will have to be written off," said Fung.

Li & Fung shares were down 5.8 percent at HK$21.75 by midday Wednesday 10 June.

(Writing by Parvathy Ullatil; Editing by Chris Lewis)

© Thomson Reuters 2024 All rights reserved.