Market Overview

Not All European Firms Are Profiting From A Weaker Euro

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Not All European Firms Are Profiting From A Weaker Euro

U.S. multinationals have been struggling under the weight of a strong dollar recently as European exporters enjoy the benefits of a devalued currency.

More competitive products as well as higher profits for sales in U.S. dollars have given Europe a leg up in the global market.

However, not all of the bloc's firms are cheering the weaker euro; some say it's only a matter of time before their margins begin to decrease.

Discount Fashion

Discount fashion retailers who purchase the majority of their inventory from China using U.S. dollars are facing a difficult decision— reduce margins or pass the rising cost of supplies on to their consumers.

Companies like H&M Hennes & Mauritz AB (OTC: HNNMY) and Associated British Foods plc (ADR) (OTC: ASBFY), the parent company of Primark, purchase well over half of their inventory from Asia in U.S. dollars.

Now, investors wonder if the stores' loyal following will continue if the rising costs are passed onto customers.

Related Link: What Should You Do About The Euro?

Airlines

European airlines like Air France KLM SA (ADR) (OTC: AFLYY) have also felt a negative impact from the euro's losses.

Although airlines have been benefiting from significantly lower oil prices, European companies that have to pay dollars for the commodity are suffering as most of their cost savings are canceled out due to currency fluctuations.

U.S. Expansion

European companies who were planning to expand into North America are also hurting from the euro's sharp decline.

German chemical giant BASF SE (ADR) (OTC: BASFY) is looking to build a methane-to-propane complex in Texas in what the company says is its largest single-plant investment ever.

The plans are set to be reviewed in 2016, but currency issues could make expansion much more costly.

 

Related Articles (ASBFY + HNNMY)

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