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Global Brands Begins Hong Kong Trading After Li & Fung Spinoff

Bruce Rockowitz, chief executive officer of Li & Fung Ltd | Source: Jerome Favre for Bloomberg
By
  • Bloomberg

HONG KONG — Global Brands Group Holding Ltd., a brands management unit spun off from Li & Fung Ltd., begins trading in Hong Kong today.

Global Brands, which manages over 350 labels including Coach Inc. shoes and licensed characters such as Angry Birds and Spiderman, started trading at HK$2.09 and rose to HK$2.13 as of 9:49 a.m. local time.

Hong Kong-based Li & Fung is spinning off the licensing and brand business to focus on its core businesses of supplying clothes and toys to global retailers such as Wal-Mart Stores Inc. and Kohl’s Corp. It is not raising any funds with the spinoff.

“We’re really focused on ‘below luxury’, that’s sort of affordable luxury, and it’s new to this part of the world,” Chief Executive Officer Bruce Rockowitz said in a Bloomberg Television interview in Hong Kong today. “We have some incredible brands that are at the beginning growth stages that we’re taking to the U.S., Asia and Europe.”

Growth Potential

Global Brands has “high growth potential” and is ready for a life of its own, Aaron Fischer, an analyst at Hong Kong- based CLSA Ltd., wrote in a note this month before the shares began trading. “We see scope for the company to upgrade the license portfolio over time,” he wrote, forecasting compound annual growth rates for sales and core operating profit of 10 and 26 percent over three years.

Barclays Plc on Monday cut its core operating profit estimates for Li & Fung, citing the company’s guidance of a margin contraction this year, and after stripping out the Global Brands business, lowering its rating to equalweight from underweight. He had estimated a valuation of HK$1.35-HK$1.65 for the company.

Li & Fung’s core business is sourcing and managing the supply chain for retailers, “which is very different from nurturing the brands,” its billionaire Chairman William Fung said in a March interview explaining the split.

Li & Fung fell 1.2 percent to HK$10.22, while the benchmark Hang Seng Index was down 1 percent.

Buying Brands

Rockowitz stepped down as president and chief executive officer of Li & Fung last week to become Global Brands’ CEO, and he was replaced by Spencer Fung -- nephew of William Fung and previously chief operating officer. The senior Fung becomes Global Brands’ chairman.

Li & Fung said in March it will accelerate organic growth across businesses in the three years through 2016, in order to double core operating profit at the logistics division and more than double it at Global Brands. The company plans to buy brands that are “capable of being globalized” during the three-year period, Rockowitz had said then without elaborating.

Global Brands, whose clients include J.C. Penney, Macy’s Inc. and Target Corp., had revenue of $3.3 billion in 2013 with 85 percent from the U.S. and the remaining from the rest of the world.

It has licensed brands including shoes made by Calvin Klein and childrenswear made by Nautica Apparel and Tommy Hilfiger.

By Vinicy Chan; Editors: Stephanie Wong, Daryl Loo

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