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Fashion retailer

A leading online fashion brand retailer in the UK

The challenge

With an average annual FX volume of £2million (predominantly in Euros), this leading fashion retailer was exposed by currency market activity in the last quarter of 2012 and worried how this would impact on the business’s bottom line. The Pound had depreciated by 3 % against the Euro between October-December 2012 and 2 % versus the US Dollar in the same period. There seemed to be no signs of any respite, with many economists and market experts convinced the pound would slump to a parity with the Euro.

The solution

When the client wanted to purchase £250,000 worth of Euros in December 2012, Global Reach Partners discussed the benefits of using forward contracts (an agreement to sell a currency at a predetermined exchange rate), as opposed to spot transactions.

 

In the same month, Global Reach Partners hedged the currency up at 1.2100 for six months to protect from any further spiral of the pound.

The outcome

Since December the pound has depreciated 7.5% versus the Euro, hitting lows of 1.1380 in March 2013. However, their profit margins were protected and, in less than three months, the company has made a saving on its bottom line of £15,000.

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