Foreign tourists used to splurge at American retailers as if they were all dollar stores.
U.S. prices looked cheap to many foreigners compared to what was on sale back at home. It was a great deal for the U.S. shops. Landmark department stores in tourism hubs like New York City lured in customers without needing to offer big promotions that eat into profits.
Not anymore. The U.S. dollar has skyrocketed against rival currencies like the euro, making goods sold in the U.S. far less attractive to foreigners.
It's gotten so bad that it's hurting Macy's (M) bottom line. On Wednesday, the department store reported a surprise decline in first quarter profits. Macy's partially blamed a spending slowdown by international tourists.
Expect other retailers to have the same problem, especially on the luxury side. Purses in Europe and Asia suddenly look cheap compared to what's on offer in the U.S.
"When the tourists come here, there is some sticker shock. Their currency buys less," said Efraim Levy, an analyst who covers Macy's at S&P Capital IQ.