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Case Analysis for a High-End Local Fashion Store

Autor:   •  October 14, 2011  •  Essay  •  512 Words (3 Pages)  •  1,130 Views

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Case I

Comments from Lucy, client CFO during first meeting:

“I work in a high-end local fashion store chain with my clothes 100%

imported from Europe.”

“My company has spare cash from my HKD revenues and the bank

deposits are NOT paying any meaningful interest.”

“I need to pay for my imports in EUR regularly, say, every quarter.”

“Views on FX? I can tell whether to stock up long or short boots this

winter, but I have no clue on those fancy financial instruments.”

“Losing money from financial instruments? Better not. My

shareholders will give me HELL if I do.”

“Yes, would be nice if we can get some extra yield but something

simple enough to explain to my bosses by SMS please.”

Analysis:

Inputs to risk identification:

1. High end HK fashion store chain with clothes 100% imported from Europe

Basic financial information (estimating data from Joyce’s annual report):

Turnover: HK D1, 063,776,000; EBIT: HKD44, 956,000

Cash paid for purchasing cloths: € 2,295,521.79 payable quarterly

2. CFO is risk averse and don’t like complex hedging strategies, she prefer to lock potential loss from exchange rate fluctuations, better to earn some interests with excess revenue

3. CEO has intention to open chain stores in China and imported

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