- European exposure is clearly something to consider given the hiatus we're seeing in the Euro's climb vs. the Dollar. But where I think it gets interesting is when we look at the change in Europe as a percent of total sales over the same time period we saw the massive 40% FX swing. On top of that, we can look at how the company's margin structure changed.
- While some company-specific drivers need to be considered, it's impossible to ignore such a massive rise in European sales in tandem with incremental margin improvement at select companies. These include GES, WRC and SKX (they just happen to be my least favorite names now - for other reasons as well).
- The best positioned companies (or the least poorly positioned) include those that have had an increase in Euro as a percent of total yet have still had margins down. These companies are not without some fleas, but the analysis shows how they have upped investment levels when faced with company-specific challenges or global growth opportunities. These include LIZ, RL, TBL and ZQK. With these companies, I think we're at a point where we will either 1) harvest investment spending, or 2) cut free up invested cash that is not yielding appropriate returns. In other words, margins should still go up regardless of which way the Euro goes.
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