Digital Access

Digital Access
Access saukvalley.com from all your digital devices and receive breaking news and updates from around the area.

Home Delivery

Home Delivery
Local news, prep sports, Chicago sports, local and regional entertainment, business, home and lifestyle, food, classified and more! News you use every day! Daily, Daily including the e-Edition or e-Edition only.

Text Alerts

Text Alerts
Choose your news! Select the text alerts you want to receive: breaking news, prep sports scores, school closings, weather, and more. Text alerts are a free service from SaukValley.com, but text rates may apply.

Email Newsletters

Email Newsletters
We'll deliver news & updates to your inbox. Sign up for free e-newsletters today.
The Holiday Gift Auction is Live! Click here and bid now on great local gifts!
Nation & World

Euro falls near $1, but goods remain pricey

Shoppers walk past the Chanel Boutique on Thursday on Rodeo Drive in Beverly Hills, California. The euro has fallen 10 percent against the dollar this year, but European luxury goods sold in the U.S. still carry luxurious price tags.
Shoppers walk past the Chanel Boutique on Thursday on Rodeo Drive in Beverly Hills, California. The euro has fallen 10 percent against the dollar this year, but European luxury goods sold in the U.S. still carry luxurious price tags.

NEW YORK (AP) – Americans hunting for a bargain on a new Beemer, bottle of Chateau Margaux or Hermes handbag thanks to the sliding euro should put away their gold cards. European luxury goods sold in the U.S. still carry luxurious price tags.

The European currency has fallen 10 percent against the dollar this year. In theory, car dealerships, department stores and other companies that sell goods from Europe could pass on the savings to their American customers, said Ira Kalish, chief global economist at Deloitte, the consulting and accounting firm.

“But what would be the point of doing that?” Kalish asked. Demand for anything made in Europe is so strong that they have little trouble moving merchandise. “From their perspective, it’s better to leave the price unchanged and pocket the profit.”

The euro has been in a long tailspin. Last April, it was trading just shy of $1.40. Since then, it sank as low as $1.04 in March before bouncing back to $1.10 on Monday.

In other words, you used to have to pay $1.40 to buy a single euro; today, you pay just $1.10.

So where are the bargains? There’s no reason to think that prices for Italian shoes and French red wines will fall along with the euro, analysts said. Part of the reason is that most European consumer products sold in the U.S. aren’t aimed at most consumers. Armani, Hermes, and Prada cater to the affluent, selling well-made products as well as the perception of prestige and status. They have an image to maintain and slashing prices isn’t part of it, Kalish said. Loyal customers might consider it, well, gauche.

“If a luxury product becomes really cheap, they might think, ‘Why am I buying it, then?’” Kalish said. “The high price makes it attractive for some people.”

Bill Earle, president of the National Association of Beverage Importers, said customers shouldn’t expect to see cheaper prices for French and Italian wines anytime soon.

Part of the explanation, Earle said, is that U.S. importers pay well in advance for wines that often take years to age. With Brunello di Montalcino from Italy, for instance, the wine sits in an oak barrel for about 4 years before it’s ready.

“One way to look at it is, the earliest you’re going to see cheaper Brunello is in 2019,” Earle said.

But even then, there’s no guarantee that businesses will pass on savings to customers. Earle said a bottle of wine has to pass through layers of businesses before it shows up on the shelves – importers, distributors and retailers — and each business has its own costs. Because currency markets can be volatile, businesses are slow to cut prices because any savings could quickly vanish with a sudden swing in currency trading.

Doug Bell, a wine buyer for Whole Foods Market, also said he doesn’t think people will see a significant fall in prices for European wines. Any drop would start showing up with the 2015 vintage, and even then, he said, other factors, such as bad weather, could easily offset a currency move.

The only way people might benefit from cheaper European wine, Earle said, is if they’re “bringing it over on an airplane.”

Similarly, anyone looking to score a Chanel handbag on the cheap is in for a letdown. Chanel’s classic handbag carried a $4,900 price tag last year, according to Robert Burke and Associates, a luxury consulting firm. That’s up from $2,250 in 2007.

Chanel is reportedly tweaking prices in other parts of the globe while leaving them alone at its U.S. stores. Robert Burke said he expects other luxury retailers to follow Chanel’s cue. Demand remains so solid for these products in the U.S. that high-end retailers have no reason to pare prices. It would only tarnish their elite image.

Nate Herman, vice president of international trade for the American Apparel & Footwear Association, said higher manufacturing costs give these companies another reason to keep prices high. Over the past decade, luxury brands such as Louis Vuitton and Prada shifted some of their production to Asia, as manufacturers in the region improved their ability to craft high-end goods. As a result, the euro’s fall against Asian currencies has driven up their costs.

It’s the same story with German luxury cars. Americans with a taste for fancy rides are already able to afford them, so there’s no need for Mercedes-Benz, BMW or Audi to pass along the benefit of a falling euro to customers by slashing prices.

Demand for these German cars remains solid. Audi’s U.S. sales climbed 15 percent last year, while Mercedes’s sales rose nearly 10 percent and BMW’s 6.5 percent. Each company is likely to pocket the extra money from exchanging dollars to euros, no matter whether the cars are made overseas or in the U.S.

The exception might be Volkswagen, whose U.S. sales sank 3 percent last year. The company behind the Beetle, Golf and Touareg could use the weak euro to cut prices and lure more buyers.

__

AP Business Writers Anne D’Innocenzio in New York and Tom Krisher in Detroit contributed to this report.

Loading more