The Supply Side: Wal-Mart and retail supplier briefs

• Li & Fung misses profit target
Global supply chain manager Li & Fung said on Thursday (March 21) that operating profits fell way short of company projections but it would focus on acquiring key brands to fuel future growth.

Li & Fung, which supplies global retailers, including Wal-Mart Stores Inc and Target Corp , said it aimed to achieve an operating profit this year similar to the $882 million it had made in 2011.

"We are unable to make it," Chairman William Fung said. "We are trying to get close to our 2011 target," he told a news conference after the company announced its 2012 earnings.

Li & Fung's operating profit fell 42% to $511 million, in line with a warning the company issued in January.

Full-year net profit slid 9.4% to $617 million in 2012 from $681 million in 2011.

Li & Fung switched its strategy in 2010 to be less of a middleman and more of a brand-management business as major clients were sourcing more goods straight from manufacturers amid economic uncertainty in the markets of the United States and Europe.

Some analysts have criticized the supply chain manager for buying little-known brands rather than quality names.

In January, Li & Fung made its first major acquisition since raising $1 billion in equity and a perpetual bond last year, paying $190 million for Lornamead, which owns personal care brands, including Yardley cosmetics and hair products Finesse and Aqua Net.

Li & Fung USA maintains a sales office in Bentonville for the business it conducts with Wal-Mart and Sam’s Club.

• Sears CEO Lampert to earn $1 annual salary
Edward Lampert, the billionaire hedge-fund manager who took control of Sears Holdings back in February has entered into a new agreement to continue as the retailer’s CEO.

Lampert, 50, will earn a salary of $1 a year, effective as of Feb. 1, according to a recent regulatory filing. But he will also be awarded stock and annual incentives worth an estimated $6.5 million annually for the first three years of his tenure.

Lampert became the fifth CEO since he merged Sears and Kmart in March 2005. Sales have declined for six consecutive years.

• General Mills reports solid profits
General Mills reported its net sales grew 8%, to $4.43 billion in the third quarter of fiscal 2013. While overall sales rose, net profits increased only marginally. The food company earned $398.4 million in the quarter, up 1.8% from the year-ago period.

Products making the strongest contributions to U.S. retail net sales growth included new items such as Honey Nut Cheerios Medley Crunch cereal, Fiber One Protein bars, Yoplait Greek 100 yogurt and Green Giant Seasoned Steamers vegetables.

New acquisitions Yoki Alimentos and Yoplait Canada contributed six points of net sales growth.

In the fourth quarter, General Mills said it expects supply chain costs to be above year-ago levels. The company continues to estimate fiscal 2013 input cost inflation of 3%. 

Fourth-quarter spending to support in-store merchandising also is expected to be above year-ago levels. Adjusted diluted earnings per share for the fourth quarter are expected to be below year-ago results that grew 15%.

Including this fourth quarter outlook, General Mills increased its guidance for fiscal 2013 adjusted diluted EPS to a range of $2.66 to $2.68, excluding mark-to-market effects, a net tax benefit recorded in the first quarter, and restructuring and integration costs.

"We are continuing to see slow, but steady, improvement in the operating environment," CEO Ken Powell said. "Trends in our established businesses are improving, and integration of our new businesses is going smoothly.  We're preparing to launch a promising slate of new products as our new fiscal year begins this summer, and our plans for fiscal 2014 call for high single-digit EPS growth, consistent with our long-term model."

General Mills is a major supplier to Wal-Mart Stores Inc. and maintains a large sales office in Rogers.