What companies are saying about foreign exhange headwinds

The dollar’s still strong—and recent earnings reports have reflected that, for better or worse.

Around this time last year, earnings took a significant forex hit. Power players like Coca-Cola and Procter & Gamble said the strong dollar hurt profits, while others, like Microsoft, cited currency fluctuations in lowered forecasts.

Back then, the dollar was at a 20-year high. In recent months, the dollar has stayed relatively high as a string of economic data suggested interest rates will stay elevated—at least for now. And after Federal Reserve Chair Jerome Powell suggested the Fed might have to keep raising rates, the US dollar index climbed to its highest since June 1.

In any case, foreign exchange rates are yet again cropping up as a talking point in recent earnings reports. Zoom, the pandemic-era video conferencing staple, said its second quarter revenue, which grew 4% year over year, faced “$10 million of pressure from foreign exchange.”

Meanwhile, Apple CEO Tim Cook referenced an “uneven macroeconomic environment” right at the start of his earnings remarks, citing “nearly four percentage points of foreign exchange headwinds.” “On a constant currency basis,” however, Cook noted that Apple “grew compared to the prior year’s quarter in aggregate and in the majority of markets we track.”

Tax filing company H&R Block said its 2023 results were marked by “foreign exchange impacts” as well as “stimulus filers that returned to the sidelines and California’s deadline extension.” Others, like Gap Inc., were more concretely hurt by forex rates. The apparel manufacturer reported net sales of $3.5 billion, down 8% compared to the year before, partly due to “a one point foreign exchange headwind” as well as two points of negative impact from the sale of Gap China.

And furniture manufacturer La-Z-Boy also cited “foreign exchange headwinds,” in this case, the strengthening Mexican peso, as a challenge to its gross margin expansion. “Given the recent strength in the peso, which is at its strongest level seen in over five years, it’s costing us more to fund our Mexican operations, and this was a $2 million drag to margins in the quarter,” CFO Bob Lucian said.