Talbots Considering Global Sourcing, Importing Firm

The Talbots is looking to get some help in sourcing and importing goods. The struggling women’s apparel and accessories merchant said in a press release it’s in discussions and has signed a nonbinding letter of intent with Li & Fung Ltd., the global sourcing and trading firm based in Hong Kong.

The companies are exploring a potential relationship for Li & Fung Ltd. to become Talbots’ primary global sourcing agent. Talbots said that a partnership with Li & Fung could create significant benefits by simplifying its sourcing processes, reduce operating expenses and potentially further reduce its cost of goods sold by leveraging Li & Fung’s global network of vendors.

Li & Fung in February signed with apparel manufacturer Liz Claiborne to be its primary global apparel and accessories sourcing agent. Liz Claiborne CEO William McComb has said that the move would allow his company to enhance its margins and become more competitive in the marketplace.

An alliance with Li & Fung could help Talbots as well, says Bob Parker, group vice president of industry insights for retail analyst Global Retail Insights in that Li & Fung will source all the fabrics and logistics.

“So if you’re Talbots, the designer gives the style and color palates to Li & Fung and they will source it all,” Parker says. The sourcing firm will line up the manufacturing, “and in some cases they can get it to port and make sure it gets to the distribution center.”

Parker says he believes the margins on Talbots products are healthy enough that it could afford to outsource the supply chain and focus on design and marketing in-house.

“I’m looking at it as another way to cut its costs,” Parker says. “Other retailers and brands have been successful outsourcing to Li & Fung, and I’m sure this is something that Talbots investors have recommended.”

Japanese supermarket operator Aeon is Talbots’ majority shareholder, and has invested $365 million in the Hingham, MA-based merchant since February, including a $150 million secured revolving loan announced April 13.

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