Li & Fung says to shed 40 Hong Kong staff, shares down
today Jul 28, 2011
July 28 - Apparel exporter Li & Fung Ltd said on Thursday it would lay off 40 staff in Hong Kong to meet the changing needs of its European business.
The company works closely with their customers to build up well-known brands. - photo: lifung.com
Shares of Li & Fung fell 4.5 percent to HK$13.62 on Thursday afternoon, on track for its biggest daily percentage decline in two weeks. That compared with a 1.09 percent fall in the Hang Seng Index.
"At the present time, as a result of the changing needs of our European business, 40 staff will be made redundant in Hong Kong," a company spokesperson told Reuters in an email reply in response to media reports about the pending move.
"In the deployment of staff, we endeavour to retain and relocate staff impacted by any potential realignment of our business," the spokesperson said.
Li & Fung said it employed 27,000 staff globally. Year-to-date there has been a net increase of 118 staff in Li & Fung's operations in Hong Kong to 4,591 from 4,473 at the end of 2010.
The layoffs will represent 0.9 percent of its Hong Kong workforce.
Macquarie Securities, which retained an "underperform" rating on Li & Fung, said in a research note that some of Li & Fung's customers are increasingly making the decision to go direct as they are being forced to find new ways of sourcing in the current high cost environment.
This will impact the level of organic growth in Li & Fung, Macquarie added.
Citi also said in a research note earlier this week that it had cut the target price of Li & Fung to HK$16 from HK$22 to reflect higher acquisition expenses.
Li & Fung, pinched by weakening U.S. and European demand, announced in June that it acquired five sourcing and trading firms as it tries to cope with rising raw materials and labour costs in China, its major sourcing destination. The move fuelled a surge in its shares as investors cheered the firm's return to an acquisition strategy that they view as key to its growth.
(Reporting by Donny Kwok; Editing by Jonathan Hopfner and Ken Wills)
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