What's going on?
US toymaker Hasbro and Dutch technology giant Philips both reported earnings on Monday that missed expectations – and their stock prices fell 3% and 9% respectively.
What does this mean?
Hasbro, the world’s biggest toymaker, hasn’t gotten over the demise of Toys R Us. The Monopoly maker didn’t pass Go or collect $200 in its third quarter – rather, its sales in North America were 7% lower than the same time last year. And its worldwide sales went directly to jail: they plummeted 25%, partly thanks to new toy manufacturers selling directly online and kids ditching board games for iPads. Philips, meanwhile, saw sales rise, with a spike in orders of its medical machinery (especially in China) – but both profit and revenue were below expectations.
Interestingly, both companies – along with American consumer goods firm Kimberly-Clark, which also reported results on Monday – said they were battling against some strong currency headwinds…
Why should I care?
For markets: Currency bites.
The US dollar’s been going from strength to strength lately – and that’s just one (admittedly large) currency-related headache for international companies to deal with. When your sales come from all over, exchange rate changes play a big role in how much money you bank at the end of the day. For US-based companies like Hasbro and Kimberly-Clark, a strong US dollar means less profit – their overseas takings buy fewer dollars than they used to. At Hasbro – which makes 41% of its sales outside the US – the strong US dollar shaved 2% ($32 million) off third-quarter revenue.
The bigger picture: American muscle, American hustle.
The US is pretty much the center of the economic universe. When the dollar strengthens, the ramifications are felt worldwide. That can mean some positives if you’re Stateside – like cheaper imported goods, lower oil prices, and a discount on international vacations. But there’s a downside: a strong dollar makes exports to the rest of the world more expensive, potentially making them less competitive.