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Business News/ Special Report / CFOs See Ongoing Pain From Foreign Exchange Oscillations

CFOs See Ongoing Pain From Foreign Exchange Oscillations


The U.S. dollar’s jolt higher this year caught companies by surprise. Now the currency is retracing some of that gain as Treasury rates slip.

Scott Roe, chief financial officer of Tapestry.Premium
Scott Roe, chief financial officer of Tapestry.

Finance chiefs are anticipating more pain from foreign exchange rates after the U.S. dollar strengthened again this summer and fall, following a historic tear last year.

The U.S. dollar index, which tracks the currency against a basket of others, surged during the third quarter on higher Treasury yields, then skipped to its highest point of the year in October, when it stood 7% above a mid-July trough. Since then, the index has tumbled 4% from last month’s pinnacle and is on track for its lowest close in months, as Treasury yields soften and investors gain confidence that the Federal Reserve will be cutting interest rates in the foreseeable future.

The dollar’s latest advance caught some U.S. companies by surprise. Mattress maker Tempur Sealy International had expected foreign exchange to provide a benefit in the third quarter of 5 cents a share, as the dollar weakened from last year’s highs. Instead, that projected gain was wiped out by the dollar’s climb.

“We had an expectation of what [foreign] currency was going to do," said Bhaskar Rao, chief financial officer at Lexington, Ky.-based Tempur Sealy. “That has dramatically turned."

The mattress maker now sees foreign exchange as a headwind for its full-year 2023 results—a reversal of previous guidance. Unfavorable currency effects are now projected to reduce earnings per share by 4 cents during the fourth quarter compared with previous expectations.

Tempur Sealy, which is also facing weakening consumer demand, this month lowered its 2023 earnings forecast to between $2.30 and $2.50 a share, down from a previous outlook of $2.50 to $2.70. Net sales in the third quarter fell 0.5%, to $1.3 billion, while profit declined 15%, to $113.3 million.

Crosscurrents in the dollar have forced U.S. companies with operations abroad to recast their expectations, corporate advisers said.

“We thought we were out of the woods, but in reality we were in a different part of the woods," said Andy Gage, senior vice president of FX solutions at Kyriba, a treasury management software provider. Gage described the U.S. dollar as meandering between peaks and valleys in recent years, its recent rise attributable to central bankers tackling pandemic-fueled inflation with higher interest rates, as well as flight-to-quality dollar purchases on the conflicts in Ukraine and the Gaza Strip.

Many companies are reviewing their hedging policies, looking for ways to minimize the impact of currency moves, advisers said. Some executives rely on hedging programs, using forward contracts and derivatives to reduce their companies’ currency risk and gain more visibility into future revenue from abroad.

While most companies haven’t yet made any significant changes to their hedging strategies, it’s a topic receiving closer attention in the C-suite, said Amol Dhargalkar, managing partner and global head of corporates at Chatham Financial, a risk advisory firm. “It’s an emerging area that CFOs and others are looking at," he added.

Tapestry, which owns fashion brands Coach, Stuart Weitzman and Kate Spade, this month reduced its revenue guidance for fiscal 2024 by approximately $175 million, $100 million of that erased by foreign exchange pressure and the remainder by weaker consumer demand in North America and Asia. The company now expects to generate about $6.7 billion in revenue for the fiscal year ending in July, down from a previous forecast of $6.9 billion.

The company modified its guidance primarily due to the strength of the dollar against the Japanese yen and the Chinese yuan, also called the renminbi. This month, the dollar hit a one-year high against the yen due to an interest-rate gap between the two countries. The renminbi, meanwhile, has weakened on the country’s sluggish economic recovery from the pandemic.

New York-based Tapestry mitigates currency risk by taking exchange rates into account when it sets prices and makes decisions regarding merchandising, according to Scott Roe, the company’s finance chief. Tapestry locks in prices on certain input costs, and sets prices accordingly, Roe said.

Rather than reacting to particular currency gyrations, the company prefers to keep its approach to hedging in place, and update investors when exchange rates affect quarterly results and forecasts, said Roe, who is also the company’s chief operating officer.

“I always tell my treasurer, ‘Don’t let me get emotional here,’" he said. Addressing himself, he added: “You keep your hands off the dials. And that’s why you put these strategies in place."

Zoetis, which makes animal pharmaceutical products, this month lowered its 2023 revenue guidance to between $8.48 billion and $8.55 billion, from a range of $8.5 billion to $8.65 billion, due to the impact of foreign exchange.

Zoetis, which sells its products in around 100 countries, estimates the impact of foreign exchange on future results based on a spot rate at the time of reporting, according to CFO Wetteny Joseph. The company doesn’t predict currency movements, he said.

Like many companies, however, Zoetis does provide investors with “constant-currency" metrics, which strip out the effects of foreign exchange. During the third quarter, for instance, revenue increased 7%, to $2.2 billion. Excluding currency effects, revenue was up 8% over the same period.

“We won’t necessarily burn too many calories on what the FX movements are, and a lot more of our focus is on the pieces that we control within our business," Joseph said.

Write to Kristin Broughton at, Jennifer Williams-Alvarez at and Mark Maurer at

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