British car parts and bicycle company Halfords is the latest retailer to report profit losses resulting from a weak pound, and the trend of losses will likely continue for companies that do not implement an appropriate foreign exchange (FX) strategy during such uncertain times.
Paul Langley, managing director of Godi Financial – claims the fallout from Brexit and the continuing instability that businesses face as the divorce settlement from the European Union (EU) is negotiated, signals the importance for businesses with FX exposure to pay stark attention to the need to safeguard themselves from currency market swings. He suggests addressing issues with a company’s FX strategy can significantly help limit financial loss and develop stability for a business’ future.
Halfords has said underlying pre-tax profits for its first half-year fell by almost 10 per cent because unfavourable currency movements impacted its retail margins. This means the company will this year be hit with a total £25m rise in costs because of Brexit.
But Halfords is not the only retailer to suffer. This year numerous British businesses, including fashion and lifestyle brand White Stuff and sports retailer Sports Direct, have also fallen victim to poor FX management and endured significant financial loss as a result.
“We are seeing this time and time again. Increases in costs resulting from a weaker pound are all too common now for British businesses. This will continue to be the case unless action is taken to help create stability in what is, and will be for the near future, a volatile currency market.
“When there is uncertainty in the economic and political arena, markets react, and this can spell bad news for businesses that are unprepared for this. A lack of education is often the case. Businesses should be seeking professional advice on hedging appropriately against market turbulence and establishing a robust FX strategy that they understand. This will provide them with the confidence that their business is protected from unnecessary financial loss caused by currency market volatility. Businesses are simply paying the price of FX neglect otherwise.”
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