Global exporter Li & Fung said business with its major customer Wal-Mart Stores is normal, but its shares still slid as much as 4.9 per cent on a report that the US retailer is cutting orders to suppliers.
“There has been no cancellation of orders from Wal-Mart, and we continue to do business with them as usual. Also, Wal-Mart is continuing to place orders for next year as normal,” a spokeswoman from Hong Kong-based Li & Fung said in an e-mail reply to Reuters.
Wal-Mart’s shares fell 1.5 per cent on Wednesday after a report by Bloomberg said the retailer is cutting orders with suppliers this quarter and next quarter to address rising inventories.
Shares of Li & Fung, which has a market value of US$12.7 billion, fell to the lowest in four weeks at HK$11.20. The stock was at HK$11.30 at 11.24am HKT, down 3.9 per cent, lagging a 0.5 per cent fall in the benchmark Hang Seng Index.
The Bloomberg report said that last week, an ordering manager at the company described the pullback in an e-mail to a supplier, who said other suppliers received similar messages.
“The story is completely inaccurate,” said Wal-Mart spokesman David Tovar. “Merchandise goes up and down at stores every day.”
Wal-Mart shares, a component of the Dow Jones industrial average, fell as much as 2.9 per cent after the report was published on Wednesday before closing 1.5 per cent lower at US$74.65 on the New York Stock Exchange.
Bill Simon, the chief executive of Walmart US, the company’s largest division, said in August that inventory in his US division jumped 6.9 per cent that quarter, citing softer-than-anticipated sales, a delay in the arrival of warm summer weather and shifts in the timing of when it received back-to-school and holiday merchandise.
“While we’re not concerned about the quality of the inventory, it will continue to be an area of focus in the coming months,” Simon said on the company’s conference call after it released quarterly earnings on August 15.
Some companies that supply to Wal-Mart have already said or hinted that the retailer was decreasing certain orders. Elizabeth Arden, for example, said on August 8 that Wal-Mart ordered less than it had anticipated, especially in June.
Still, the retailer has been forecasting better sales. Simon said on September 11 that he expected sales to improve in the second half of the year after his chain posted declines in sales at stores open at least a year – better known as same-store sales – in both the first and second quarters.
Tovar was quoted in the Bloomberg story as saying the order pullback was not “across the board” and was happening “category by category”.
“In some cases, we’re going to be taking less, in some we’re going to be taking more,” Tovar said in the story.