Exporter Li & Fung has signed an agreement to source goods for the world's largest retailer, Wal-Mart Stores, in a multibillion-dollar deal that will give it a much-needed income boost.
WSG, a Li & Fung subsidiary, will source exclusively for Wal-Mart over the next six years, although the United States department store giant will also be able to use other agents or buy directly from suppliers, according to the agreement.
In the first year, Li & Fung will source about US$2 billion worth of merchandise ranging from apparel and shoes to cosmetics.
A key term of the deal gives Wal-Mart the option to acquire WSG when the agreement expires.
Li & Fung executive director Bruce Rockowitz said the deal and the takeover option were mutually beneficial.
'We will bring lower prices to Wal-Mart and they will deliver a big sales volume to us,' he said yesterday.
The deal marks a big step forward for Li & Fung's business ties with Wal-Mart, with some analysts saying it would also boost the Hong Kong firm's bottom line significantly this year.