Market Overview

Strong Dollar Could Have Dire Consequences For Luxury Market

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Strong Dollar Could Have Dire Consequences For Luxury Market

U.S. firms from almost every industry have complained that the stronger dollar is negatively impacting their bottom line. With the greenback on the rise against international currencies like the euro, the yuan and the yen, U.S.-made goods are becoming less and less competitive in the global market.

However, luxury goods may have been harder hit than others as that market depends on several factors that have been impacted by the most recent market turmoil.

Strong Dollar Deters Shoppers

Tiffany & Co. (NYSE: TIF) was forced to reduce its yearly earnings forecast forecast due to the dollar's strength. The jewelry maker saw that despite the fact that sales increased at international stores, translating those purchases into back into U.S. dollars meant the company took a major hit. Tiffany's sales in Japan increased by 27 percent, but once changed into U.S. dollars, the sales were only boosted by 7 percent.

Related Link: August Retail Sales: The Early-Month Tax Holiday, Labor Day Shift And Three Brands To Look At

Tourism Hit

Another reason luxury brands are struggling in the US has been a lack of tourism. In the past, many foreigners opted to buy expensive products while traveling in the US because prices were cheaper than they could get in their home currency. However, a strong dollar has kept many tourists from splurging on a shopping trip during their holidays.

Earlier this year, Macy's Inc. (NYSE: M) reported that part of the company's 13 percent decline in first quarter profit could be attributed to a lack of spending from overseas visitors.

Image Credit: Public Domain

 

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