21 Jan 2015
US multinationals feel the heat of a strong US dollar
The strong US dollar usually a problem for US companies as it hurts overseas sales, makes products less competitive leading to a fall in the earnings.
With the USD index at multi-year highs, its effects are likely to become clear as multinational companies report their Q4 2014 earnings in the days ahead. Johnson & Johnson said yesterday that if the USD rate, its earnings could drop two or three times below the projections made in October. For door-to-door beauty company Avon, the dollar strength is weighing heavily on the company’s results, since it generates a fifth of its sales from Brazil and other countries like Russia, Argentina, Poland. Consequently, due to dollar strength the company’s Q3 sales were down 8%.
Meanwhile, a strong USD is also weighing over businesses having exposure to tourism. Tiffany & Co, world’s premier jeweler, warned last week that fewer tourist and the strong USD contributed to disappointing holiday sales. “When the dollar was weak, we saw loads of Europeans coming here to shop,” said Mark Aaron, vice president of investor relations.
Similar concerns were expressed by Myron Ullman, CEO at J.C. Penney Co. and ex chairman of the Federal Reserve Bank of Dallas that a strong USD is a threat to growth as it increases the cost of American products and services overseas.
With the USD index at multi-year highs, its effects are likely to become clear as multinational companies report their Q4 2014 earnings in the days ahead. Johnson & Johnson said yesterday that if the USD rate, its earnings could drop two or three times below the projections made in October. For door-to-door beauty company Avon, the dollar strength is weighing heavily on the company’s results, since it generates a fifth of its sales from Brazil and other countries like Russia, Argentina, Poland. Consequently, due to dollar strength the company’s Q3 sales were down 8%.
Meanwhile, a strong USD is also weighing over businesses having exposure to tourism. Tiffany & Co, world’s premier jeweler, warned last week that fewer tourist and the strong USD contributed to disappointing holiday sales. “When the dollar was weak, we saw loads of Europeans coming here to shop,” said Mark Aaron, vice president of investor relations.
Similar concerns were expressed by Myron Ullman, CEO at J.C. Penney Co. and ex chairman of the Federal Reserve Bank of Dallas that a strong USD is a threat to growth as it increases the cost of American products and services overseas.