6assignment wk6

Investigate the company’s earnings in its latest quarter. Explain how currency fluctuations across the globe have affected earnings. Search each of the latest financial reports to find such information. Make sure you research the information from the perspective of currency fluctuations on revenue, earnings, and global market share. Yum! Brands, Inc. is a major franchisor and licensor of fast-food restaurants with more than 49,000 units in over 145 countries. They include KFC, Pizza Hut, and Taco Bell brands. On April 28, 2021, Yum! Brands reported a “strong recovery driven by record digital system sales of over $5 billion with accelerated off-premise growth” (Yum! Press Release, 2021, para. 1). The report continues, “worldwide system sales excluding foreign currency translation grew 11%, with 9% same-store sales and 1% unit growth” (para. 1). Since the company acquired two technology-focused companies, they expect to increase exposure of their brands through digital and marketing campaigns. The report is extensive since three major brands are represented through Yum! Brands, Inc. KFC and Taco Bell increased 11%, while Pizza Hut grew at 7%. “Foreign currency translation favorably impacted divisional operating profit by $16 million” (Yum! Press Release, 2021, para. 4). Since Yum! Brands are present in 145 countries, currency fluctuations across the globe make significant differences in profitability. Clearly, the COVID-19 pandemic leaves the brand to uncertainties surrounding the duration of restaurant operations. Revenue in the Q1 of 2021 were 1.435 billion. While CFRA provides a favorable outlook for Yum! Brands in the coming year, one caveat pertaining to our discussion topic for this week has to do with “a steep and/or protracted global economic recession or sharp decline in consumer spending; and foreign currency headwinds” (CFRA, 2021, p. 1). Most of this has to do with the COVID-19 pandemic. An outcome from the pandemic is increased efforts for cost reduction measures, including efficiency improvements. Related to exchange rate, Yum! has made a major push in China since 2016, which has a population of 1.3 billion with a rapidly growing economy. “The company plans to increase the number of units in China at a double-digit rate with same-store sales growth of at least 5%” (CFRA, 2021, p. 2). The opportunity in China could present a great deal of growth, particularly with China’s relatively stable currency. =========================== John Deere was officially incorporated in Moline Ill. In 1868 as Deere and Company (Columbia Electronic Encyclopedia, 2021). The company was started by John Deere that was born in 1804 and started selling plows in 1837, before moving to Moline Ill. (Columbia Electronic Encyclopedia, 2021). In the first quarter of 2021 John Deere grossed nearly 12 billion compared to just over 9 billion in the first quarter of 2020 (John Deere SEC filings, 2021). The Net over the same period was 1.8 billion in 2021 to .66 billion in 2020 (John Deere SEC filings, 2021). “U.S. currency has appreciated versus major rivals as the first quarter comes to a close, with the euro EURUSD, -0.24% falling to a year-to-date low on Thursday, trading near $1.1775. The ICE U.S. Dollar Index DXY, 0.21%, a measure of the currency against six major rivals, rose to a more-than-four-month high at 92.92 on Thursday” (MarketWatch, 2021). When, the dollar rises in value imports become more affordable and it cost mor to export (Hayes, Boyle, 2021). John Deere does business in 30 countries and the currency exchange rate would be different in most of them with Europe having only one currency collectively (John Deere, Worldwide Locations Map, 2021). Using multiple export destinations as well as a domestic market helps John Deere mitigate cost associated with currency exchange rates. When the dollar is strong Deere can focus on domestic sales and when the dollar is weak it can focus on its foreign markets. In economics there are always winner and losers. With a strong dollar, importers profit more, and exporters profit less; with a weak dollar, importers profit less, and exporters profit more (Hayes, Boyle 2021). “Just as imports become cheaper at home, domestically produced goods become relatively more expensive abroad. An American-made car that costs $30,000 would cost €22,222 in Europe, with an exchange rate of 1.35 dollars per euro; however, it increases to €26,786 when the dollar strengthens to 1.12 per euro. Some have argued that expensive exports can cost American jobs.” (Hayes, Boyle 2021). The US dollar is showing to be stronger at this point, meaning that John Deere can profit from importing things such as parts and supplies. The intricate business model that a large corporation has makes it difficult to state that they make more off one market over another given the value of the dollar. When imports are cheap John Deere would probably save money on parts and foreign labor rates etc. When imports are expensive John Deere will would save money domestically. Large businesses can gain value from diversifying markets and sources; there is an old saying about “not putting all your eggs in one basket”, this is true in business as well, although on a much larger scale. The bottom line is that John Deere has so many revenue streams and supply lines that one generally will offset the other, giving John Deere a more predictable revenue stream, and businesses like to control their own destiny. “Just as imports become cheaper at home, domestically produced goods become relatively more expensive abroad. An American-made car that costs $30,000 would cost €22,222 in Europe, with an exchange rate of 1.35 dollars per euro; however, it increases to €26,786 when the dollar strengthens to 1.12 per euro. Some have argued that expensive exports can cost American jobs.” (Hayes, Boyle 2021).