By  on November 15, 2004

LONDON — The increasingly feeble dollar and the mighty euro are forcing Europe’s fashion, luxury and textile companies to raise retail prices, shore up their shrinking margins and hedge, hedge, hedge.

The dollar has reached new lows against the euro and the pound, closing against the euro at 1.2967 on Friday. Overall, the dollar is down 11 percent against the European currency in the first half.

“We cannot keep squeezing our gross margins,” said Ralph Toledano, president of Chloé, which to date has absorbed about half of the losses from currency fluctuations. Toledano said there have been price increases, especially for permanent and more basic items. He said further increases in the euro will be passed on, in part, to consumers.

Burberry is another company that has been forced to raise prices over the past year due to the weak dollar. Burberry’s prices have risen by 6 to 8 percent year-over-year due to the currency fluctuations.

“We don’t like to take prices up if we don’t have to, but maintaining margins is an important objective,” said a company spokesman. “So you try to do things cheaper by working with suppliers and manufacturers and by hedging.”

Burberry locks in dollar-pound exchange rates six to nine months in advance of paying for goods and services. “Through dollar-sterling hedging, we’re generally better able to smooth or absorb any potential price increases that would be passed on to the consumer,” he added.

Bulgari, too, makes a habit of hedging. Francesco Trapani, chief executive of the Rome-based luxury jeweler, said the company traditionally hedges against currency fluctuations eight to nine months ahead of time.

But Bulgari also benefits from a weaker dollar since it buys raw materials such as diamonds and gold in dollars. Those savings help compensate for the negative effects of a strong euro-to-dollar exchange rate.

“We have traditionally been one of the companies that has been the least affected by the issue,” said Trapani, adding that, until now, Bulgari has not increased prices in the U.S. But he cannot rule it out for the future.

Hugo Boss also is able to take advantage of the weak dollar. “We produce most of the merchandise for the American market at our production site in Cleveland, so the dollar doesn’t affect us that much. Our American prices didn’t rise in the past and won’t rise,” said a spokesman.

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