KarstadtQuelle sells sourcing business to Li

FRANKFURT, Oct 1 (Reuters) German retailer KarstadtQuelle said on Sunday it has sold its international sourcing business to Hong Kong's trading firm Li&Fung for an undisclosed sum, a move that would help cut its working capital.

Karstadt said in a statement Li&Fung took over its entire international sourcing business grouped under KarstadtQuelle International Services AG (St Gallen), including 1,000 workers.

In April, sources said Li&Fung was likely to buy Karstadt's sourcing operations for between 0-0 million.

Both companies agreed not to disclose the price.

Helmut Merkel, a board member of Karstadt, said the company would focus on design, assortment and merchandise presentation following the sale.

''We benefit from a relevant 500 million euros reduction of the working capital,'' Merkel said in the statement.

He said the deal would also prolong payment terms to 120 days and lowering purchase price reductions to 10 percent from 5 percent on average.

Karstadt also said the move would help increase the number of collections up to 12 a year and improve its competitiveness.

Li&Fung, which is also a partner for firms like Marks&Spencer and Wal-Mart, would handle Karstadt's sourcing volume worth about 2 billion euros in 2008.

KarstadtQuelle, a household name in Germany that set up shop in the 1880s, has been trimming its sprawling portfolio of specialist shops and mail-order businesses as sales wilt.

Unlike retailers Carrefour and Metro AG, which have sought growth overseas, Karstadt garners most of its sales in Germany, where a slump in consumer spending over several years has hit retailers.

REUTERS DKS GC1612