STORES WEIGH DOLLAR’S DROP
Byline: Mark Tosh, with contributions from Katherine Weisman, Paris
NEW YORK — As if they didn’t already have enough price points and styles to shop, retailers now must focus more on another market: currencies.
At the European collections, which concluded last week, retailers began writing orders even as the dollar continued to fluctuate in value against most major currencies. Over the past few months, it has plummeted about 7 percent versus the French franc. The dollar was trading at about 5 francs for $1 late last week.
With the franc down, some retailers predicted they could end up spending more on U.S. designer collections this season and less in Paris.
For many French fashion houses, the fall of the dollar comes at a time when their U.S. business has been improving. The decline could reverse the trend.
At the same time, however, the Italian lira has held fairly steady against the dollar, and many U.S. retailers left Milan two weeks ago having increased their budget for Italian collections, which will be sold this fall in the stores. The lira was trading at about 1,690 lire for $1 late last week.
One thing is certain. Budget-conscious U.S. retailers are weighing the value of the dollar as carefully as ever as they prepare to attend the New York designer collections.
Burt Tansky, chairman and chief executive officer of Neiman Marcus, said the value of the dollar “is not an issue” for goods priced in lire.
“For the franc, it’s a wait-and-see game,” he added.
The rate of the dollar could affect Neiman’s buying if a particular line goes up sharply in price, Tansky said in an interview in Paris early last week.
“That’s when we might shift our approach,” he explained.
Given the currency fluctuations, Tansky said he believes American designers could benefit from the dollar’s drop “if they can hold their prices. But many of their fabrics come from Europe, and they themselves might be involved in price pressure, too.” Still, Tansky said he expects some designer price increases, but he is hoping they will be kept to a minimum.
“We hope resources will make an effort to keep prices from going up too sharply,” he said. “But we are used to minimal to moderate price increases, and we have them built into our buying plan.”
Michael Gould, chairman and ceo of Bloomingdale’s, said the dollar’s drop has forced him to reexamine purchasing on French products, including apparel and tabletop goods.
“I am very concerned about the dollar against the franc; the dollar has slipped so much,” he said. Gould said Bloomingdale’s had “no plans right now to shift” buying from France to Italy, but could decide to spend more on Italian collections given the right circumstances.
“This is something we definitely have to watch,” he said. “We need to carefully look at the Italian programs. If they are really great, it might be worth increasing our spending.”
At Saks Fifth Avenue, the declining value of the dollar “directly impacts our cost of goods sold,” said Brian Kendrick, vice chairman. “And for the most part,” he added, “we don’t pass that on to the consumer. We absorb it with lower gross margins.”
As a result, Kendrick said, the currency fluctuations are bound to influence Saks’ buying decisions.
“The fall of the dollar will certainly have some impact on how we buy our merchandise,” he said.
For example, he said, if the lira is weak compared with other currencies of other countries where Saks buys, “then we’re naturally going to be drawn there [to Italy],” he said. However, Saks already purchases heavily out of Italy, and officials had previously determined that the time was right for intensifying the buy.