Then margins will most likely be further compressed especially in the US. However given that roughly half the sales originate in Europe this helps to balance the effects. The company continues to make investments in stores in Europe where the effect of Euro appreciation will not be as pronounced and margins are higher. Currently the company is capable of achieving 6% margins at 1.20 exchange rate which is impressive and I believe shows the inherent ability for organisations to adjust to circumstances as long as they are cash producers rather than consumers. The absolute exchange rate isn't the problem for a company like this it is the rate of change. I think it is unlikely that the Euro will rapidly appreciate from currently levels given that OECD PPP puts it around 1.11 which means the Euro is likely 10% over valued at its current levels. Still as we know there is no reason why a currency will not trade substantially higher or lower than PPP as the Euro has shown over short periods of time (5 yrs) but not indefinitely. Given the cash in the bank and the profitability of this company I still do not understand why it trades at such a discount to IV. I am happy to hold and watch the cash come in. The company has proven over the last 5-10 years that it is a prudent allocator of cash, through specials, buybacks and brand building when required.