Things you should know about Li & Fung's strong end to 2013

Thanks to robust operating profits.

According to Barclays, the strong end to 2013 was based on organic performance, non-recurring and operating profits.

Management said there were no props or one-offs that pushed up the numbers and said it believes that overall sentiment improved in the US toward year-end but that it did better than the overall market by gaining share with key clients.

Here's more from Barclays:

The company is cautiously optimistic on the trends for 2014 and expects to deliver reasonable earnings growth for they year.

Management also clarified that there were no savings from non-recurring cost reductions that propped up its numbers for 2H13. Inventories with retailers are down, which should help going into 1H14.

The US now appears to be looking better overall than previously as is Europe, according to management, although it has not seen the same level of improvement as the US. 

Fortunately, the US government shutdown occurred in October, which, thus, had a much lower impact on apparel sales vs. what might have happened had the shutdown been in November or December.

Therefore, the company now expects that it ended the year within a smaller percentage variance (either up or down) vs. its previous guidance of a reversion to the 2011 core operating profit level. Li Fung did better in a tough market and reduced its charge backs and margin dilution.

Management said one of the factors that likely helped was that retailers went into the year-end with low/cautious inventories so the mildly positive demand resulted in refill orders. Management said the company is doing well with the likes of Costco. Kohl’s had a strong Christmas. Macy’s also had a decent 4Q13.

The company believes there is still significant room for it to gain further market shares with the top 10 US retailers.