Question

Given the nature of Levi's business, discuss whether (or not) you expect the company is affected by exchange rates.

Answer 1

Levi's is exposed to clothing and clothing accessories and these are one of the important part of disposable income of the consumer and when the interest rates are going to change, it will be impacting the behaviour of the consumer because consumer would be trying to either save more or or spend more according to the change in the interest rates.

it can be seen that when there would be a high level of inflation into the economy the interest rates should be hiked by Federal Reserve as a monetary policy measure and it would be impacting the consumer sentiments and consumers will be cutting on to their demands so it would lead to a overall change in demand in the consumers and that would be leading to reduction of the sales of Levi's

When there would be decrease into rate of interest by the Federal Reserve it would mean that Federal Reserve is trying to stimulate the demand of the economy and such situations are better for Business, because the demand of the consumer will be going up and it would mean that consumers would be trying to spend more into the clothing and the clothing accessories and that would be leading to a higher amount of sales and higher amount of margins of profits.

so it can be said that Levi's business is highly exposed to the changes in the interest rates because it is dependent upon the disposable income of the consumers and consumers are trying to change the pattern of their savings and spending due to changes in the interest rate structure.