A specialist apparel wholesaler of workwear and menswear, based in Melbourne, Australia, supplies large customers with rolling orders. With exposure to multiple currencies, the business faced significant challenges in managing profit margins during periods of extreme volatility in the FX market.
The client needed a robust hedging strategy that would both protect margins and allow them to remain competitive in pricing.
Strategy: Rolling Hedge with Mixed Products
Corporate Alliance FX implemented a tailored hedging strategy aligned with the client’s order cycles. The solution combined a mixture of products Forwards and Option products, providing both stability and flexibility in varying market conditions.
Analysis and Benefits
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Margin Protection: The hedging approach safeguarded profit margins against sharp currency swings.
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Sales Growth: Competitive and stable pricing contributed to increased sales with existing customers.
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Proactive Support: The dealer maintained regular contact, providing timely updates on market movements and product recommendations.
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Confidence in Pricing: With reduced uncertainty, the business could confidently offer competitive prices, strengthening their position with customers.
Outcomes
The partnership with Corporate Alliance gave the wholesaler:
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Greater financial certainty through a structured hedging plan.
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Increased sales growth tied directly to stable, competitive pricing.
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Long-term confidence to operate in volatile market conditions.
Without Hedging Strategy
If the wholesaler had continued without a structured hedging plan, ongoing FX volatility would have directly impacted their margins. Unstable costs would have forced higher, less competitive pricing, limiting growth opportunities with existing customers.
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Exposure: Constant margin risk due to currency fluctuations
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Pricing: Forced to raise prices to protect margins
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Outcome: Lost competitiveness and slower sales growth
With Tailored Hedging Strategy
By adopting a rolling hedge with a mix of products – the wholesaler stabilised margins and locked in confidence to offer competitive prices. This not only protected profits but also boosted sales with existing customers.
- Strategy: Rolling hedge aligned with large customer orders
- Products: Forwards and Options based on Customer’s Risk Appetite
- Outcome: Competitive pricing maintained, margins protected, sales growth achieved.
Client Testimonial
It is definitely worth talking to the CAFX team about your FX requirements, you will be well looked after.
