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Luxury Market Update 2012 Outlook
2004

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2009

June 10, 2009
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

8% CAGR 95-00 14% 5% 14% 17% 3% 0% -5% 5% 9% CAGR 04-08 E 6% +6.5% +0% 9% 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 20072008E 2 This information is confidential and was prepared by Bain & Company solely for the use of our client.In 2008 the luxury goods market was flat Worldwide Luxury Goods Market trend (1995-2008 E) €200B 160 130 134 134 128 134 120 80 76 40 11% 10% CAGR: 6. it is not to be relied on by any 3rd party without Bain's prior written consent. .5% 146 159 170 170 111 84 93 98 CAGR 00-04 0.

-10%) • Compensation effect to the decrease of already committed new openings and full potential of 2008 numerous new openings 0 2008 2009FK At constant exchange rates – assuming no change in the forex for 2009 • Wholesale crisis as for actual order campaign (-20%) with aggressive mark-down campaigns (-30% on 50% of products) 3 Source: Bain analysis This information is confidential and was prepared by Bain & Company solely for the use of our client. .0% €200B By semester 170 154 150 100 -10% 50 By channel • Retail Like-for-Like decreasing as the current trend (-5%. it is not to be relied on by any 3rd party without Bain's prior written consent.In 2009 we expect the market to shrink by 10% ESTIMATES Bain Forecast April 2009 Main Assumptions • First semester average market trend as the worst actual one: -15%-20% • Slower decrease in the second half of the year: -5% .

industry experts .luxury retailers • Analyst reports *wholesale calculated through average mark-ups This information is confidential and was prepared by Bain & Company solely for the use of our client. 4 .players’ top management .We developed long-term forecasts for luxury market following a twofold approach Methodology Top-down approach • Regression based on correlation of Luxury market and real GDP between 1995-2008 • Market forecast based on GDP projections by geographical area Sources • Bain Luxury Study • Analyst reports • Worldwide trade associations • International Monetary Fund (World Economic Database) • Bloomberg research Luxury goods market Forecasts Bottom-up approach • Market estimates based on benchmarking of competitors’ current trading and sell-in/sell-out projections for the next seasons • Interviews to . it is not to be relied on by any 3rd party without Bain's prior written consent.

0 0.01 Wealth (liquid assets) Disp.90 0.2 100 0.72 200 WW Luxuy market Real GDP 0.0 Correlation of Luxury market with macro-indicators (EU example) 0.96 0.4 0. .3 Real GDP Housing prices 0.72 0.3 Consumer confidence 0. Example Europe Luxury market 1.0 2.8 0.7 5 Tourist arrivals 1.96 0.6 0.8 0 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 Growth multiple 1. it is not to be relied on by any 3rd party without Bain's prior written consent.We found strong historical correlation between Luxury market and key macroeconomic facts Luxury market and GDP development (current exchange rate) Indexed (1995) 300 Pearson correlation (-1 to +1).20 0.2 0.9 Luxury market outperformed economic development Luxury market development closely related macro-indicators Luxury market can be forecasted using GDP projections This information is confidential and was prepared by Bain & Company solely for the use of our client. income Stock price 0.

it is not to be relied on by any 3rd party without Bain's prior written consent. 6 .Order taking will be negative until FW10 Order taking 2009 Order taking 2010 Also order taking forecasts can be a proxy of market trend for next 12-24 months This information is confidential and was prepared by Bain & Company solely for the use of our client.

8 on a global basis to GDP trend • 2009 and 2010: GDP forecast adjusted based on current trading and order taking +1% -10% 207 2008 2009 2010 2011 2012 • Dramatic decline of -10% in 2009 • 2007 market value recovered by 2012 7 This information is confidential and was prepared by Bain & Company solely for the use of our client.Luxury market will not recover before 2012 Bain Forecast (Constant exchange rates) Main Assumptions €200B 170 170 154 156 150 162 174 • GDP trend: -strong contraction in 2009 -flat in 2010 -recovery beginning 2011 0% 100 +7. 0 .5 % +4% 50 • Luxury reaction with a multiple of 1. it is not to be relied on by any 3rd party without Bain's prior written consent.

refreshing their looks with few key items and accessories • Down-trading on fashion items. impacting negatively logo and showy products 8 This information is confidential and was prepared by Bain & Company solely for the use of our client. it is not to be relied on by any 3rd party without Bain's prior written consent. investing in evergreen items Polarize • Accelerating Cheap & Chic • Fast Fashion players winning the game • Delay high-ticket and classic/basic purchases • Booming season-end sales and discount channels • Willing to spend only for items and brands who pass the worth-ittest • Aspirational consumers trading down Value for Money Understatement • Austerity is fashionable even for wealthiest consumers • Extravagant spending considered irresponsible or disrespectful • Luxury shame.. . reusing purchases from past years Reduce & Reuse • Shoppers are trying to update their wardrobes inexpensively • ..The current crisis is changing consumer trends • Consumers “shop their closets”.

it is not to be relied on by any 3rd party without Bain's prior written consent.Women are trading down on fashion items Main trends in Female Luxury Consumption Main consumption shifts ABSOLUTE Value proof brands and long lasting products revamp Drastic decrease in ostentation Impact on market trend ASPIRATIONAL --“Fashion for money” “Cheapest and chic” ACCESSIBLE -CLASSIC / CONTEMPORARY = FASHION 9 This information is confidential and was prepared by Bain & Company solely for the use of our client. .

Men are delaying classic and formal purchases Main trends in Male Luxury Consumption Main consumption shifts ABSOLUTE Delaying purchase Niche loyal fashion freak Impact on market trend -ASPIRATIONAL = “Casual for money” Trading down ACCESSIBLE --FORMAL CASUAL/FASHION 10 This information is confidential and was prepared by Bain & Company solely for the use of our client. . it is not to be relied on by any 3rd party without Bain's prior written consent.

recycle“ Consumption caps “I think there was too much of everything…the whole industry had to take a laxative” Diane Von Fustenberg “I believe the cautious approach of customers everywhere towards spending on luxury goods is something that will stay…” Patrizio di Marco. Gucci “Nice to have has vanished. Fendi “Some prices are just too expensive for what you are getting.Some trends will fade away slowly.. reuse. Hermès is doing very well. but others are here to stay Accelerated & upcoming trends that will fade out „Reduce. CEO.it’s also that there was kind of indigestion. Fashion became just too much…” Dries Van Noten 2007 2008 2009 2010 … Core trends Emerging trends 11 This information is confidential and was prepared by Bain & Company solely for the use of our client. Why? I can still use my mother’s handbags…” Diane Von Fustemberg „Inconspicious consumption“ „Redefine true luxury“ “Real value” for money Luxury shame Accelerated. President and Ceo. it is not to be relied on by any 3rd party without Bain's prior written consent.. But for compelling pieces. there’s no price resistance…” Michael Burke. . lasting trends Consumer experience „Polarization“ Spend polarization Trends that stay relevant Consumer conscience Feminisation Brand fatigue Tribalism Technology dependence Sensory/ indulgence Individualism “I don’t think it’s only the financial problem.

Despite the crisis. new generations. emerging markets • Continuing growth of aspirational consumer base (especially in Asian and emerging markets) • New opportunities may come from changing values and consumption habits Growing customer base This information is confidential and was prepared by Bain & Company solely for the use of our client. market fundamentals remain strong in the long-run • Growth of personal wealth and HNWI forecasted to recover from the second half of 2010 • Global GDP forecasted to grow in 2010 • “New luxury segments” are emerging: working women. long-term prospects for the luxury market remain strong • Despite current negative trends. 12 . it is not to be relied on by any 3rd party without Bain's prior written consent. men.

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