International

Global Retail Outlook Cause For Concern

For better or worse, China's economy has assumed the nebulous mantle as the bellwether for the larger globalized economy. When things are good, investors can act off of China's moves before they propagate to the rest of the world; when things are bad, they wring their hands.

That's the situation that many are finding themselves in after comments made by Hong Kong-based Li & Fung, according to Financial Times. On a recent earnings call, the supplier with international reach announced that its revenue had dipped 2.4 percent to $18.8 billion in 2015, while net shareholder profit sank 4.6 percent to its new normal of $421 million. In light of that information, Li & Fung CEO Spencer Fung said Thursday (March 17) that investors shouldn't convince themselves that things are about to rebound any time soon.

“The global economy looks challenging,” Fung said on the call. “For 2016, the consumer sector is likely to remain weak, and factory deflation will continue.”

It seems as if more than a few investors have listened to these warnings, albeit far in advance of Fung's call. FT noted that the company's shares have plummeted 36 percent over the past year, and with its top executives blatantly explaining the less-than-profitable role ahead, it's difficult to imagine anyone buying low at this point.

To his credit, Fung did attempt to assuage concerns about all of his company's operations. For instance, Li & Fung's logistics branch generated 6.7 percent more revenue in 2015 than the year before.

“The changes happening [in] retail are impacting everyone along the value chain,” Fung said, according to FT. “Our customers are looking to us to help them navigate these changes with innovative products and increased speed to market.”

Li & Fung's customers and much of the Western retail world are waiting to see if it can make good on its promises to pull itself out of this recent slump and, if the rest of China's economy follows suit, all the better.

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