Before we even see the bulk of FX translation risk play out, organic sales growth is starting to tank. Add this to even greater cost pressure than in the US, and this is not good for Europe.
  • Yes, FX risk is important. In fact as I’ve recently noted, I think that a strengthening dollar will ultimately expose the broken margin structure for many companies in this industry. But let’s not forget the actual organic sales growth outside of the U.S. either. Euro-zone retail sales were down 3.1% in June. As far as I can tell, that’s just about the lowest number since the Euro was born.
  • As I highlighted in greater detail in my 7/25 ‘Trouble Brewing in Europe?’ post, Europe appears to be feeling a disproportionately higher import cost hit on raw materials than the US to higher dependency on China. Keep in mind those companies with significant European exposure. Things can turn… FAST.
This is one scary retail sales chart. Euro-zone retail sales yy change.
Exposure to Europe varies meaningfully by company.