Outlook For U.S. Apparel And Footwear Industry Is Weaker As Dollar Strength Dents Earnings: Moody's

The outlook for the U.S. apparel and footwear industry has deteriorated thanks to the strong dollar, which is denting earnings and sales, Moody's Investors Service said Monday. "While the hedges taken this year will partially protect margins, the strong US dollar will continue to have negative foreign currency translation effects on the industry's gross profits for the rest of this year," Scott Tuhy, a Moody's senior credit officer said in a statement. "The strong dollar has discouraged spending by tourists to the United States, impacting sales at brands such as Ralph Lauren and Calvin Klein, dragging on apparel sales." The outlook for the overall sector has been revised down to stable from positive, said Moody's. The rating agency is now expecting operating income growth to weaken to 3% to 5% in 2016 from 5% to 7% in 2015. The industry will find it difficult to raise prices to offset higher costs, which could shave about 40 basis points off margins next year, said the statement.