* Jan-June net profit $312 mln, beats consensus
* Core operating profit falls 22 pct, Europe weak
* Shares up 3 percent ahead of results
HONG KONG, Aug 9 (Reuters) - Supply chain manager Li & Fung Ltd, whose global distribution and trading centres make it a useful barometer of consumer sentiment, reported its half-year core operating profit slipped by more than a fifth due to a slower-than-expected turnaround of its LF USA unit and weak demand in Europe.
The Hong Kong-based group, which manages supply chains for major retailers such as Wal-Mart Stores Inc and Target Corp, said, however, that net profit rose by a third as it booked write-backs on two 2010 acquisitions.
Analysts had predicted that U.S. retailers would be actively re-stocking as consumer confidence improves, boosting top-line growth at Li & Fung this year, but latest data showed spending by consumers fell in June for the first time in nearly a year.
January-June net profit rose to US$312 million from a restated $235.5 million a year ago, beating an average forecast for $272.4 million from five analysts polled by Thomson Reuters. Li & Fung reports every six months in U.S. dollars. Core operating profit fell 22 percent to $221 million.
The company, valued at $16.7 billion, was founded early last century as a trader in porcelain, jade and silk. It now provides one-stop supply chain management - from product design, raw material sourcing and manufacturing to shipping and wholesale.
It is halfway through an ambitious 3-year growth plan and aims to expand its sourcing network to generate higher profits.
In a statement, the company said that while first-half core operating profit was relatively weak, the group was "very focused on taking the necessary steps to improve the second-half results and set the stage for 2013, the last year of its current three-year plan."
U.S. contributions to revenue for Li & Fung are the lowest ever at 60 percent, while Europe's is at a 5-year low at 21 percent as of end-December, Thomson Reuters data shows.
Li & Fung employs more than 28,000 staff worldwide and has a sourcing network of over 15,000 suppliers. The United States and Europe traditionally account for about 90 percent of its business.
The company said in May that its orders had not been affected by a slowing China economy, and it expected China to remain its main sourcing market over the next three years.
EARNINGS REVISED
Analysts have revised down their full-year Li & Fung earnings estimates on concern that high operating costs will keep margin growth in check. They say Li & Fung will have to rely on acquisitions to meet its targeted core operating profit of $1.5 billion in 2013.
Li & Fung's January-June core operating profit margin fell to 2.4 percent from 3.2 percent.
The company is seen as a potential bidder for Los Angeles-based J Brand, a women's apparel maker which hired Morgan Stanley to help it explore its strategic options, including a sale or an initial public offering.
Last month, analysts at Citi raised longer-term concerns over Li & Fung losing customers after U.S. clients such as children's clothing firm Carter's Inc and Gymboree Corp moved towards direct sourcing.
Eleven of the 20 analysts covering Li & Fung rate the stock a 'buy' or 'strong buy', with four recommending investors 'sell' the stock, according to Thomson Reuters data.
Li & Fung shares have risen around 17 percent since hitting a 9-month low late last month. The stock ended up 3.1 percent at a 13-week closing high of HK$15.98 ahead of the results on Thursday.
