Looking At The Trend Of Global Luxury Brands From The Depreciation Of RMB

The depreciation of the renminbi and the strength of the dollar are stirring the world.

Some companies will obviously benefit from the profits of brand fashion companies, while others will suffer a serious downturn.

Some analysts believe that all luxury companies are sparing no effort in controlling prices and narrowing the global spread, and the latest devaluation of the renminbi has made many Western luxury.

Facing a more difficult situation.

Affected by the depreciation of the renminbi, the consumption of overseas Chinese tourists and overseas purchasing agents will inevitably decrease, and the depreciation of the renminbi will make the strategic abacus of luxury domestic prices empty.

In March of this year, the euro fell to its lowest level in the 12 year against the US dollar at $1.95, and rose slightly to $1.09 in the latter period. Deutsche Bank strategic analysts predict that the euro will fall to 90 cents against the US dollar at the end of 2016, and will continue to fall to 85 cents by the end of 2017.

Whether or not this speculation will come true, fashion brands are being forced to adapt to the pattern of currency exchange rate changes.

One of the quick and ruthless ways is to raise prices in the euro area.

Because of the value of the renminbi linked to the US dollar, some companies have taken measures to reduce prices in the Chinese market.

It is one of the companies that adopted this measure, in April, the brand handbag depreciates in China, and the price rises in the European area after the first Euro collapse.

With the emergence of the European grey market, a large number of buyers bought cheap handbags with euro, and then sold to consumers of strong currency countries at a high price. After that, Chanel's classic brand handbags increased by 20%.

In June, Levi Strauss &Co. cowboy costumes were raised in Europe.

In a recent performance report, Ralph Lauren said that the company would raise its price in countries affected by currency devaluation, and the price increase would be between the median and high level.

For some non large global fashion enterprises, such as Neiman Marcus or Bloomingdale 's are also affected by the strong dollar, the purchasing power of overseas tourists in major cities has been far behind.

The earnings of non US headquarter companies are also affected by monetary resistance, but the modes of influence vary.

For instance,

The origin is in Asia, where the currency is linked to the dollar, but their price is shown in a disadvantaged euro.

Neiman Marcus says it's in it

The S-1 document has already indicated that a large part of the stock of the brand comes from overseas suppliers whose goods are priced in different currencies.

Global companies that have grown overseas have found that overseas turnover is not dominant after they are returned to the US dollar.

Levi 's said its original revenue increased by 1%, but its income declined by 6% because of the exchange rate effect.

In Europe, the net turnover of Levi 's increased by 9% in the first quarter, but income was pulled down by 46 million dollars due to exchange rate differences.

Most companies try to use hedging pactions to mitigate these unstable currency valuations.

Unfortunately, these deals have aggravated the problem.

Jean-Marc Duplaix, chief financial officer of Kai Yun group, said in a recent conference call of the company's performance report: "more than half of Gucci's performance declines are due to currency fluctuations and hedging."

"Currency is always hard to predict," said Jean-Jacques Guiony of LVMH group in a recent conference call.

Although LVMH group has benefited from currency exchange, it is also facing currency hedging.

LVMH group stated in its statement that the net expenditure in the first half of 2015 was 207 million euros, which amounted to $225 million under the current exchange rate.

This is much higher than the 67 million euro ($72 million) in the first half of 2014.

Clothing companies have found that their European dealers are also affected by price or hedging problems.

Uggs manufacturer Deckers said the strong US dollar led to a reduction in its international distributor orders and their purchasing power was cut off.

Another side effect of the strong US dollar and the weakness of the euro is a marked change in tourism consumption patterns.

The link between the renminbi and the US dollar will be strengthened.

The Chinese government has shifted its purchasing power to Europe because of the anti corruption version of the Chinese government.

Japan has also ushered in a wave of China's tourism consumers for higher currencies.

According to reports, the weakness of the Chinese market is a big problem for a company like Coach.

Its business in the United States is experiencing a major downturn, and sales in the 2014 fiscal year dropped by 20%.

The company expects the annual sales in the Chinese market to increase to $600 million in fiscal year 2015, accounting for 14% of total sales in the fiscal year.

Therefore, if the weakness of the previous quarter in the Chinese market continues, sales will continue to decline compared with sales (after the impact of new or closed stores), which is unbearable for Coach.

Considering that Chinese consumers are more keen on overseas shopping preferences, the depreciation of the renminbi will bring a double blow to luxury brands.

Last week, Coach said that the reason why the Japanese market was booming was largely due to the influx of large numbers of Chinese tourists.

The German fashion brand Hugo Boss said in its performance report statement that in the first half of this year, the company's performance in Europe was driven by tourism consumption of Chinese tourists, which grew by more than 50%. Italy was also a success in doubling its turnover.

Chinese consumers now surpass Russian tourists and become the main force in promoting European brands.

Kai Yun group also emphasized the impact of this change. In its earlier performance report, it pointed out: "the change of the RMB exchange rate has greatly promoted the development of the tourism industry.

For Gucci, American local customers contribute more to performance, while the contribution from tourists decreases.

Because of the strength of the US dollar, Chinese and American tourists are more willing to spend in Europe.

Ralph Lauren also talked about the changing status of tourists in the conference call. Robert Madore, the brand's chief financial officer, said: "we find that the rate of arrival in European and Japanese markets has increased significantly, while the US is decreasing.

Our European performance has increased by two digits.

The negative impact of foreign exchange on income growth is about 500 basis points. "

No matter how the exchange rate is, the pain to the company is the same.

In a recent quarterly report on the global market, Gildan Sportswear said that the negative impact of the exchange rate on the company was as high as $10 million.

AVON's quarterly revenue fell 0.17%, diluted by 15 cents per share.

Neiman Marcus said in the S-1 document that the net income for the first quarter ended May 2nd was $19 million 800 thousand, but the company suffered a loss of $15 million 700 thousand against the exchange rate and the total revenue was reduced to $4 million 900 thousand.

Although it sounds like all companies are suffering from currency exchange rates, L'OREAL seems to be on the edge. The brand said in its performance report that "9.7% positive money has affected 14.7% turnover."

The weakness of the euro has given the company the advantage because the company's turnover comes from a strong dollar zone.

Tod s said in its earnings call conference that the company's turnover increased by 7.9% in the first half of 2015 due to positive exchange rate fluctuations.

If it is not for exchange rate gains and hedging contracts, turnover will only increase by 1.8%.

While the LVMH group struggling with its hedging measures, 13% of its turnover growth was offset by the positive exchange rate effect.

The company said in its earnings report: "most of the conversions took place this year due to the hedging pactions implemented by the company last year, which means that our turnover and the profits of all the subsidiaries in the world will be converted into euros, which is why we have achieved an additional 14.5% turnover and profit growth."

Looking forward to the future, many fashion and beauty companies believe that the issue of RMB exchange rate will ease in the second half of the year.

Most people say that even if the euro continues to be weak, commodity prices will soon reach the upper limit.

Moreover, the rise in commodity prices in Europe may eliminate consumers' psychology of looking for bargains.

However, if the US raises interest rates by the end of 2015, it will lead to a stronger dollar and a further decline in the euro.

Authoritative analysts predict that the continued weakness of the euro, the current luxury price of luxury brands in Europe may not be enough, and may continue to rise in price.

It is noteworthy whether the renminbi will further depreciate significantly.

In the past, luxury goods in China only worried about the impact of anti-corruption, and now they have a headache, that is, the exchange rate.