What's going on?

Tiffany & Co., the well-known American jeweler, suffered a 15% decline in its second quarter profits (versus last year) mainly due to the stronger US dollar. It also sharply cut its profit outlook for the remainder of the year. Its stock was down 2% on the news and is now down more than 20% this year.

What does this mean?

This is a good example of how a strong US dollar can hurt American companies. The stronger dollar makes Tiffany�s jewelry more expensive for overseas buyers. It also means that the profit it makes overseas is worth less when translated back to US dollars. Tiffany�s vulnerability is even greater than most companies, because 25% of its US sales are to visiting tourists who are thinking how much its jewelry costs in their home currency terms. Ouch.

Why should I care?

1. It�s a useful reminder of how much of an impact changes in currency value can have on the price of a stock, although sometimes a company will �hedge out� some of the foreign exchange risk. Pay attention to currency risk when researching a stock.
2. The broad appreciation of the US dollar seems to have run its course, at least for now.�This might be a good price at which to buy the stock if the dollar doesn�t move much higher from here.