Li & Fung grabs Royal Velvet license
January 8, 2004,
HONG KONG — Heading east with much of America's textiles manufacturing, the Royal Velvet nameplate, perhaps the most profitable nameplate in all of home fashions, is about to be licensed to Li & Fung Ltd., a $4.8-billion, Hong-Kong-based consumer goods trading company.
Li & Fung, a Chinese holding company with interests in apparel, home fashions, toys, shoes and sporting goods, said its Li & Fung Trading (Shanghai) unit will design, produce and distribute home textiles and home decor products under the Royal Velvet franchise. The process will take place on a worldwide basis, with products hitting the market as soon as this fall.
In a statement released yesterday, Li & Fung said it has signed a "memorandum of understanding" with New York-based Group 3 Designs. Group 3 is handling the licensing of the former Pillowtex brands on behalf of GGST, a newly formed company which bought the Pillowtex assets in a bankruptcy court auction last October. Li-Fung said it expects to sign a final licensing agreement by the end of this month.
Royal Velvet is the second major U.S. brand Li & Fung has licensed in recent weeks as it aggressively builds an increasingly large platform for global growth. Earlier, the Chinese company cut a deal with Levi Strauss & Co. to design, produce and market a line of tops under the Levi Strauss Signature brand in the United States.
For decades, Royal Velvet had been the premier, and dominant, department store towel brand in the United States. Estimated sales in 2002 for all Royal Velvet home textiles, including towels, was $124 million.
Still up in the air is the fate of the other three Pillowtex brands — Fieldcrest, with about $143 million in '02 sales; Cannon, at $133 million; and Charisma, about $76 million. Group 3 Designs is still negotiating licensing deals with prospective home fashions producers.
Mary Gleason, president of Group 3 Designs, said, "Li & Fung has well-established relationships with many leading retailers globally that fit into the positioning of the Royal Velvet brand. We see good prospects ahead for this new line of business."
Li & Fung, a global trading company, sources manufactured product through a network of offices in 40 nations and territories for customers in the United States, Europe, Asia and the Southern Hemisphere.
During the 2002 fiscal year, Li & Fung sales totaled $4.8 billion U.S., up 13.2 percent from $4.2 billion during 2002. The Chinese trading company generated a profit of $139.2 million, up 38.1 percent from $100.8 million in 2001.
News of the new Royal Velvet and Levi Strauss licenses triggered a steep rise in the value of Li & Fung stock on the Hong Kong Stock Exchange Wednesday, Jan. 7. Shares jumped up by 7.4 percent, or $1.00 a share, to $14.50 from $13.50 the day before. Trading was unusually heavy, with 19.8 million shares changing hands, more than twice the average daily trading volume of 8.8 million shares. Shares are now trading at a new 12-month high, surpassing a former 12-month high of $14.30. Li & Fung shares have more than doubled in value over the past 12 months, jumping up by 102.8 percent from a 52-week low of $7.15 a share.
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