Exchange Rate Wars Affect Luxury Goods Industry

About 75% of the luxury goods are manufactured and produced in Europe, while about the same proportion of products are sold outside the continent.

Therefore, the luxury industry has a significant depreciation of the US dollar.

Overall, the weakening of the US dollar and the strengthening of the euro will not be good for European luxury companies benefiting from the weaker euro this year, says Luca Solca, a senior analyst at Bernstein Research, Bernstein research.

Global luxury sales are expected to grow by about 10% this year, but will slow next year.

"The weakening of the US dollar has affected sales of luxury goods companies in Europe by about 45%, hindering revenue growth," he said.

He predicts that if the US dollar stays at the current level against the euro, it will reduce the luxury sector's revenue by about 5% in the first half of next year.

Among the major luxury goods groups, Richemont and Swatch (Swatch) have issued a warning about the adverse exchange rate effect next year.

Pernod Ricard, which produces Absolut Vodka (Absolut vodka) and Paris's Perrier-Jouet, exports from Europe more than imports.

The group said last Thursday that according to the current exchange rate estimate, the positive impact of exchange rate on estimated operating profit will be greatly reduced for the fiscal year ending June 2011.

As the euro strengthened against the US dollar, the positive impact of the exchange rate would be 30 million euros (US $42 million) rather than the 120 million euro forecast in September, said the company.

Since the beginning of June, the US dollar has fallen by 17% against the euro.

Analysts said that because luxury firms are hedging for the next 6 to 18 months, that is, they can overcome short-term exchange rate fluctuations, they should reduce part of the exchange rate pressure.

In addition, compared with other global industries, luxury brands also have greater pricing power, so they can flexibly adjust the retail price to offset the effect of severe exchange rate fluctuations.

However, Scilla Huang Sun, head of securities at Swiss & Global Asset Management in Zurich, believes that the US dollar is weaker than Asian currencies for longer and should be beneficial to the luxury group that is increasingly dependent on the growth of Asian consumers. (Global)

"A strong Asian currency will enhance the spending power of Chinese consumers, thereby benefiting the luxury sector," she said.

Chinese consumers account for 21% of the global luxury market, contributing 52% of their growth.

In Europe's commercial streets, the tension between Asians and consumers of European and American consumers has been revealed.

This relationship is clearly reflected in the increasingly influential tourist consumers who contribute about 15% of global purchases, and concern about exchange rate fluctuations no less than fashion concerns.

Luxury Group executives said that in the past year, Chinese consumers' purchases in Europe increased by 90%, followed by Russians, while the number of consumers in the US and Japan has decreased.

In Italy, Chinese tourists contributed up to 15% of the total sales of some brands, compared to almost zero two years ago.

In a luxury coffee shop called Cova on Via Montenapoleone in Milan, Napoleon speaks in Russian or Chinese, which is no less than Italian.

Shoppers at various faces have shopping bags with Gucci, Prada (Prada) and Zegna (Ermenegildo Zegna) logo at their feet.

Gian Giacomo Ferraris, chief executive of Versace (Versace), said that "the rich Chinese start to travel more frequently", which only has a positive impact on the luxury industry. "Gian"