Luxury & Cosmetics Factbook PDF

Challenging growth in the luxury
and cosmetics sector

The luxury and cosmetics
financial factbook
2014 edition
2013 has been a challenging year for the luxury
industry, perhaps the most challenging since the
recession of 2009, and we see this on the impact
on the overall industry growth rate.
Paul Wood
Partner, Advisory
Contents 2 Executive summary
Statistics and key facts
Index evolution
6 DCF and valuation parameters

A. Financial parameters
B. Operating aggregates
C. A
dvertising expenses and net working
capital analyses
D. SOTP and segment analyses
E. Trading multiples
F. Transaction multiples
32 Industry overview
A. Global luxury goods market
B. Global cosmetic goods market
44 Methodology
Approach
SOTP analyses
Sample selection
Focus on Moncler, Coty, Tumi, Hengdeli and
Chow Tai Fook
54 Glossary
55 Contact us
Page 2
Executive summary
Welcome to the fourth edition of EYs annual financial factbook for the (only Europe is missing). By 2020, it is estimated that more than half of
luxury and cosmetics sector, which focuses on the current industry trends, consumers will be in tropical zones, with hot and humid climates, and
the evolution of the operating aggregates and the key financial parameters. over 60% of the worlds population will be living in major urban areas
The factbook combines publicly available data with input from our sector affected by pollution, so the demand for high-quality cosmetics will
leaders based on our experience working with many of the leading luxury never be higher.
and cosmetics companies in the world.
What are the key areas of focus that executives in the industry should
2013 has been a challenging year for the luxury industry, perhaps the focus on over the next year?
most challenging since the recession of 2009, and we see this on the
Develop a clearer strategy for the future Chinese market Long seen as
Paul Wood impact on the overall industry growth rate. For the first time in three
the panacea for easy growth, the market for China business, both domestic
Partner, Advisory Paris years, the industry growth rate has slowed to single digits at 2.4%*
EMEIA and Global Coordinator and tourist, is under pressure. Domestically, we saw the new president make
(10.4% FY12) giving a personal luxury market worth an estimated
paul.wood@fr.ey.com pronouncements against corruption and gift giving, and higher pricing
217b. This smaller but still positive growth is mainly led by the US and
due to luxury sales taxes has had a slowdown effect on the domestic China
Chinese consumption (all over the world) and is supported by the resilient
market for luxury. Many luxury houses invested heavily over the last 5 to 10
accessories segment and the progression of the online channel. Looking to
years to expand their retail estate into second- and third-tier cities and are
the future, however, we still see positive annual growth rates in the range
now seeing a reduction in demand in these markets. In some areas, some
of 4% to 6% through FY16. We believe that this positive future growth will
of these stores are simply showcases for the Chinese customer to explore
be driven by longer-term urbanization, a reduced drag on the wholesale
before their overseas shopping trips. Amid a lack of brand loyalty, a desire
market and an increasing shift toward younger, male customers. If overall
for higher-end and more unique products, and an increasing demand for
growth rates have declined, profitability in the sector has been maintained
a digital channel, the right mix of wholesale, retail and online for the China
on average 1% less than last year, and this is largely due to volume growth,
market is no longer clear. However, we believe adjusting or developing the
a high retail mix (with higher margins) and a declaration by many players
right strategy to win in China is essential for the future.
of an increased focus on efficiency.
Andrea Guerzoni Why?
Partner, Transaction Support Milan The cosmetics market shows a smaller decline in growth rates in 2013
EMEIA TAS Leader (3.8%) and remains a solid market at 175b. The longer-term outlook In 2013, Chinese customers accounted for approximately one-third of
andrea.guerzoni@it.ey.com also remains positive as the world population with access to cosmetics the global spend on luxury. The Chinese middle class is evolving, with
in emerging markets is estimated to increase by 50%. As a result, the more higher-income households likely to fuel growth in the teens in luxury
beauty industry is expected to double in the next 10 to 15 years with demand. By 2020, Chinese customers are expected to add up to 40% to
China, the US, Brazil, India and Japan forecast to become the top markets luxury growth.
*Includes currency effect
The luxury and cosmetics financial factbook 2014

Executive summary Page 3
Executive summary
Focus on efficiency While many large and small luxury houses deftly manage their luxury consumer is falling, largely due to the China and Asian market, and the emergence
increased retail footprint, this is not always the case across the back office. The core of e-tailers, particularly in the US fashion market, is starting to challenge the traditional
skills, such as brand image and management, merchandising, range and assortment luxury world. The need for a consistent digital strategy has never been more pressing.
planning design and manufacture have to be in order to compete in todays world
Why?
of challenging growth. However, many houses, including the international groups, are
somewhat artisanal in how they organize and deliver what are considered non-core or Online penetration is growing at a rapid pace. While only 4.5% of sales, it is growing
support functions such as finance, procurement, logistics, HR and IT. Relatively simple at a massive 30% year-on-year growth. Sixty percent of the online luxury market is in
things for other industries such as leveraging enterprise resource planning, using the US, despite all the hype about Chinese teenagers, with accessories having the highest
big data and analytics to enhance decision-making, and structuring decentralized or penetration to date. M-commerce currently represents one-third of all traffic and up to
centralized organizations are often lacking when benchmarked against other sectors 10% of sales for some brands.
and are leading to increasing pressures on margins.
This edition of the factbook, based on your feedback, has been focused to deliver
Why? operational and financial aggregates about the industry, along with key valuation
parameters and multiples. We hope that this report proves to be insightful and provokes
This pressure is being compounded by increasing competition from mass prestige
constructive thought and discussion within your organization.
pushing up into the luxury market. Houses are now turning their attention to becoming
as efficient and effective as possible. Upwards of 30% can be taken out of SG&A costs by
having leaner processes, better decision-making tools and more appropriately structured
support functions.
While this may seem small compared to some of the EBITDA delivered due to high margins
and volume-based growth, luxury houses should and are now starting to take
the efficiency of their support functions more seriously. Paul Wood Andrea Guerzoni
paul.wood@fr.ey.com andrea.guerzoni@it.ey.com
Accelerate your digital presence E-commerce strategies are not new to the sector,
but we have seen that the luxury houses have lagged behind other industries in
developing clear and concrete plans for capitalizing on the digital opportunity.
Historically, a luxury customer has typically been a middle-aged, high-net-worth
individual, and the intangible rarity associated with luxury products seemed to be at odds
with the fast, young, 24/7 world of the digital economy. However, the average age of the

Page 4
Statistics and key facts
Global personal Online sales Currency China, Brazil Mass-market The Urban
luxury market reached 30% fluctuations still and the US sales tailed off, middle class
grew by 2.4% year-on-year impact luxury contributed to particularly in could drive
in 2013. growth in real purchasing
patterns
almost half
of the global
US and
the cosmetics
market
terms.
(Japanese yen, cosmetics Asia. growth 50%
Russian ruble, market over the next
The US market
has shown US demand
Indonesian
rupiah and
in 2013.
For both the 20 years
sustainable signs (+7%) surpassed luxury
Brazilian real).
of recovery, Asia as luxurys and
New markets in
while the main growth cosmetics
Asia-Pacific and
Chinese market engine in The global industries,
Latin America
is expected to
maintain low-
2013. cosmetics represented digital is
proving to be a Younger
digit growth.
market grew
80% of premium
by 3.8% the global
game-changer,
increasing consumers
in 2013. cosmetics engagement from emerging
market growth. with consumers economies
and the US are
driving demand

Page 5
Executive summary
Index evolution
The analysis reported in the graph below shows that the EY luxury and cosmetics index (represented by the
companies we included in the EY factbook) has outperformed the market over the last six years with a total
return of 63%, corresponding to an average yearly significant return of 7.7%, despite the economic downturn.
This relative performance actually illustrates the appetite of investors for an industry that has demonstrated
solid financial fundamentals in terms of sales growth, major profitability, international client base and
exposure to emerging markets, attributing higher valuations to companies-related securities.
The EY index is a representation of those luxury and cosmetics companies analyzed within the factbook.
A specific weight has been attributed to each company included in the EY index based on its market
capitalization and revenues (each of these two parameters weighing for a half). The relative weights have
been revised at every company inclusion after its IPO. Finally, the evolution of the EY index has been
compared to these of the S&P 500 and STOXX Europe 600 indexes using 1 January 2008 as a starting date
(rebased to 100).
EY luxury and cosmetics index evolution compared to major indices (base 100 as of 1 January 2008)
200
As of 31 J ul 2014
180
163.0
16 0
140 133.0
120
100
92.2
80
6 0
40
20
0
J an- 08 Apr- 08 J ul- 08 Oct- 08 J an- 09 Apr- 09 J ul- 09 Oct- 09 J an- 10 Apr- 10 J ul- 10 Oct- 10 J an- 11 Apr- 11 J ul- 11 Oct- 11 J an- 12 Apr- 12 J ul- 12 Oct- 12 J an- 13 Apr- 13 J ul- 13 Oct- 13 J an- 14 Apr- 14 J ul- 14
EY index STOX X S& P
Source: Capital IQ

PAGE 6 OPENING
Positive future growth will be driven by

longer-term urbanization, a reduced drag on
the wholesale market and an increasing shift
toward younger, male customers.
Paul Wood
Partner, Advisory
DCF and valuation parameters

LUXURY AND COSMETICS THE EY FINANCIAL FACTBOOK 2014
Opening Page 7
Executive summary
A Financial parameters
B Operating aggregates
DCF and valuation parameters

DCF and valuation
Advertising expenses and net working
C
parameters
capital analyses
D SOTP and segment analyses
Industry overview
Trading multiples
F Transaction multiples
and disclaimer
Methodology
and specific analyses
Sample selection
Contact us
Glossary
Page 8 DCF and valuation parameters
A Financial parameters Luxury companies continue to reflect high-potential growth

combined with a limited risk profile
WACC ranges from 7.6% (Luxottica) to 10.5% (Ralph Lauren, Chow Tai Fook), depending on the companies
risk profile perception, with an overall limited variance.
There is a wider range in long-term growth rates (1% to 4.8%), mainly depending on geographical presence,
size and product diversification.
WACC and LTGR by company

12.0 Luxury Market
capitalization WACC Gearing Beta LTGR
11.5 companies (in m)
11.0 R alph Lauren Chow Tai Fook LVMH 65,304 9.0% 7.8% 1.01 2.3%
10.5 Salvatore
Richemont 39,688 9.0% (15.9%) 1.21 3.1%
10.0
Ferragamo Swatch Herms 24,528 8.3% (4.1%) 0.72 3.6%
Hengdeli Swatch 23,706 9.3% (4.1%) 1.08 3.1%
Kering
WACC ( %)
9 .5 Hugo Burb erry Brunello

Boss Coach Tod s Cucinelli Luxottica 18,865 7.6% 7.5% 0.50 3.1%
9 .0
LVMH
R ichemont Kering 18,000 9.6% 16.1% 0.96 2.6%
Tif f any
8.5 Michael Kors 14,293 8.7% (4.4%) 1.21 4.5%
Prada Herms Michael Kors
Safilo
8.0 Moncler Prada 13,657 8.7% (2.0%) 0.83 2.7%
7.5 Luxottica Chow Tai Fook 12,268 10.5% 1.8% 1.17 3.6%
Ralph Lauren 10,451 10.5% (8.4%) 1.26 1.0%
7.0
0.0% 1.0% 2.0% 3.0% 4.0% 5 .0% Coach 9,914 9.2% (6.2%) 1.06 2.7%
LTGR
Tiffany 8,422 8.6% 7.5% 1.17 3.2%
Note: Bubble size reflects market capitalization. Dotted lines represent average values. Burberry 7,691 9.5% (3.4%) 1.01 3.3%
Hugo Boss 6,540 9.2% 1.1% 0.59 2.5%
Salvatore Ferragamo 3,657 9.5% 1.1% 0.66 3.1%
Source: Moncler 3,217 8.3% 5.2% 1.01 3.2%
WACC and LTGR: based on consensus of several brokers reports for Tods 2,908 9.2% (6.3%) 0.67 2.9%
each company Brunello Cucinelli 1,333 8.9% 1.2% 0.62 4.8%
Market capitalization and beta: EY elaboration based on S&P Capital IQ Tumi 1,139 10.4% (1.9%) 1.64 n.a.
Gearing: companies financial statements Safilo 964 8.4% 18.3% 0.72 2.0%
Notes: Hengdeli 679 9.8% 21.6% 1.12 3.7%
Market capitalization is based on a one-month average as of 31 March 2014. Companies are sorted in Average 9.1% 1.6% 0.96 3.0%
Gearing is defined as net financial debt/enterprise value. decreasing order based on the
Median 9.2% 1.1% 1.01 3.1%
Beta correspond to levered beta measured on a weekly basis over a two-year period. market capitalization in euros
Maximum 10.5% 21.6% 1.64 4.8%
Beta figure for Moncler might be influenced by an insufficient number of observed as of 31 March 2014
observations on the considered period. (one-month average). Minimum 7.6% (15.9%) 0.50 1.0%

DCF and valuation parameters Page 9
A Financial parameters The cosmetics sample is characterized by a smaller number of

companies, which significantly impacts the average value of
financial parameters
Naturas (Brazil) long-term growth rate is significantly higher than the average sample, driven by its
geographical coverage.
DCF and valuation

WACC sample levels are balanced by the two extremes of Natura (Brazil geographical risk) and
parameters
Shiseido (Japan).
WACC and long-term growth rate (LTGR) by company

14.0 Market
Cosmetics
13.0 capitalization WACC Gearing Beta LTGR
12.0 companies
11.0 Natura (in m)
10.0 LOral 69,368 8.2% (1.8%) 0.67 3.0%
LOccitane
9.0 Coty
LOral Este Lauder 19,355 7.9% (0.6%) 1.14 2.7%
WACC (%)
8.0
7.0 Beiersdorf 15,908 7.6% (8.7%) 0.69 2.1%
6.0 Beiersdorf
Este Lauder Natura 4,985 10.4% 10.8% 0.64 4.8%
5.0
4.0 Shiseido 5,161 6.1% 15.2% 0.75 n.a.
3.0 Coty 4,226 8.2% 23.7% 1.08 2.0%
2.0
1.0 LOccitane 2,483 8.7% (8.7%) 0.65 2.3%
0.0 Average 8.2% 4.3% 0.80 2.8%
0.0% 1.0% 2.0% 3.0% 4.0% 5.0%
Companies are sorted in
LTGR Median 8.2% (0.6%) 0.69 2.5%
decreasing order based on the
market capitalization in euros Maximum 10.4% 23.7% 1.14 4.8%
Note: Bubble size reflects market capitalization. Dotted lines represent average values.
observed as of 31 March 2014
Minimum 6.1% (8.7%) 0.64 2.0%
(one-month average).
Sources:
WACC and LTGR: based on consensus of several brokers reports for
each company
Market capitalization and beta: EY elaboration based on S&P Capital IQ
Gearing: companies financial statements
Notes:
Market capitalization is based on a one-month average as of 31 March 2014.
Gearing is defined as net financial debt/enterprise value.
Beta correspond to levered beta measured on a weekly basis over a
two-year period.

A Financial parameters EY luxury and cosmetics sample:

summary of financial parameters
WACC (in %) Beta Gearing (in %) LTGR (in %)

Shiseido 6 .1% Luxottica 0.5 0 R ichemont ( 15 .9 ) R alph Lauren 1.0%
Luxottica 7.6 % Hugo Boss 0.5 9 Beiersdorf ( 8.7) Safilo 2.0%

Beiersdorf 7.6 % Brunello Cucinelli 0.6 2 L' Occitane ( 8.7) Coty 2.0%
Est e Lauder 7.9 % Natura 0.6 4 R alph Lauren ( 8.4) Beiersdorf 2.1%
L' Or al 8.2% L' Occitane 0.6 5 Tod' s ( 6 .3)
L' Occitane 2.3%
Coty 8.2% Salvatore Ferragamo 0.6 6 Coach ( 6 .2)
LVMH 2.3%
Herms 8.3% Tod' s 0.6 7 Michael Kors ( 4.4)
Hugo Boss 2.5 %
Moncler 8.3% L' Or al 0.6 7 Swatch ( 4.1)
Kering 2.6 %
Safilo 8.4% Beiersdorf 0.6 9 Herms ( 4.1)
Coach 2.7%
Tif f any 8.6 % Safilo 0.72 Burb erry ( 3.4)
Est e Lauder 2.7%
Michael Kors 8.7% Herms 0.72 Prada ( 2.0)
Prada 8.7% Tumi ( 1.9 ) Prada 2.7%

Shiseido 0.75
L' Occitane 8.7% Prada 0.83 L' Or al ( 1.8) Tod' s 2.9 %
Brunello Cucinelli 8.9 % Average 0.9 2 Est e Lauder ( 0.6 ) Average 3.0%
Average 8.9 % Kering 0.9 6 Hugo Boss 1.1 L' Or al 3.0%
LVMH 9 .0% LVMH 1.01 Salvatore Ferragamo 1.1 R ichemont 3.1%

R ichemont 9 .0% Burb erry 1.01 Brunello Cucinelli 1.2 Swatch 3.1%
Hugo Boss 9 .2% Moncler 1.01 Chow Tai Fook 1.8
Luxottica 3.1%
Tod' s 9 .2% Coach 1.06 Average 2.2
Salvatore Ferragamo 3.1%
Coach 9 .2% Swatch 1.08 Moncler 5 .2
Moncler 3.2%
Swatch 9 .3% Coty 1.08 Tif f any 7.5
Tif f any 3.2%
Burb erry 9 .5 % Hengdeli 1.12 Luxottica 7.5
Burb erry 3.3%
Salvatore Ferragamo 9 .5 % Est e Lauder 1.14 LVMH 7.8
Chow Tai Fook 3.6 %
Kering 9 .6 % Chow Tai Fook 1.17 Natura 10.8
Shiseido 15 .2 Herms 3.6 %

Hengdeli 9 .8% Tif f any 1.17
Tumi 10.4% Kering 16 .1 Hengdeli 3.7%
Michael Kors 1.21
Natura 10.4% R ichemont 1.21 Safilo 18.3 Michael Kors 4.5 %
R alph Lauren 10.5 % R alph Lauren 1.26 Hengdeli 21.6 Brunello Cucinelli 4.8%
Chow Tai Fook 10.5 % Tumi 1.6 4 Coty 23.7 Natura 4.8%
WACC 8.9% Beta Gearing LTGR

0.92 2.2% 3.0%
Low High Low High Low High Low High
Industry benchmark Industry benchmark Industry benchmark Industry benchmark
Source: Data based on consensus of several brokers reports for each company.
Note: LTGR data was not available for Tumi and Shiseido.

B Operating aggregates Sales of the luxury companies sample are expected to grow an
average of 10% annually over the next three years
Expected growth will mainly be driven by:

Michael Kors, Chow Tai Fook, Moncler and Tumi
notably outperformed average growth levels. Continued strengthening of US economy, resulting in strong domestic demand
DCF and valuation

Longer-term urbanization and the shift toward younger and more male consumers
parameters
The waning drag on the wholesale segment
Sales CAGR, FY12AFY15E luxury companies

Michael Kors 32.7% CAGR
Sales (in m) FY12A FY13A/E FY14E FY15E
Chow Tai Fook 18.9 % (FY12A-FY15E)
Moncler 17.0%
Michael Kors 1,812 2,418 2,987 4,237 32.7%
Tumi 16 .6 %
Brunello Cucinelli 13.6 %
Chow Tai Fook 5,374 7,094 7,924 9,029 18.9%
Burb erry 12.1% Moncler 489 581 677 783 17.0%
Hengdeli 10.8% Tumi 289 339 394 458 16.6%
Average 10.1% Brunello Cucinelli 280 323 364 410 13.6%
Herms 9 .9 % Burberry 2,418 2,817 3,073 3,404 12.1%
Prada 8.8% Hengdeli 1,415 1,561 1,743 1,927 10.8%
Salvatore Ferragamo 8.6 %
Herms 3,484 3,755 4,178 4,625 9.9%
Swatch 8.5 %
Prada 3,297 3,587 3,821 4,245 8.8%
Tif f any 7.4%
Salvatore Ferragamo 1,155 1,256 1,354 1,478 8.6%
R ichemont 7.4%
Ralph Lauren 7.3%
Swatch 6,401 6,943 7,535 8,173 8.5%
Hugo Boss 7.2% Tiffany 2,754 2,926 3,160 3,414 7.4%
LVMH 6 .2% Richemont 10,150 10,645 11,529 12,569 7.4%
Luxottica 5 .5 % Ralph Lauren 5,040 5,328 5,731 6,235 7.3%
Kering 4.6 % Hugo Boss 2,346 2,432 2,665 2,890 7.2%
Tod s 4.1% LVMH 28,103 29,149 31,155 33,626 6.2%
Safilo 3.4%
Luxottica 7,086 7,313 7,727 8,322 5.5%
Coach 2.2% *Kering sales for FY12A-FY15E Kering* 9,736 9,748 10,336 11,129 4.6%
exclude numbers for Groupe Fnac,
Tods 985 983 1,028 1,112 4.1%
Redcats, Conforama and CFAO.
Safilo 1,199 1,122 1,246 1,327 3.4%
Notes:
Coach 3,457 3,683 3,544 3,686 2.2%
2013 figures are estimated or actual
depending on their availability as of Average 10.1%
the date of this study. Median 8.5%
Figures are converted into euros
Maximum 32.7%
Source: Data based on consensus of several brokers reports for using exchange rates as of 31 March
each company. 2014. (Source: Capital IQ) Minimum 2.2%

B Operating aggregates Sales growth expectations for cosmetics players are lower than
for the luxury segment but still show an average annual growth
of 5% over the FY12A-FY15E period
Majority of players are expected to grow at lower single digits, except for Natura and LOccitane.
Natura and LOccitane significantly
outperformed the cosmetics sample The rising middle classs increased consumer spending, particularly in emerging markets, is likely to
expectations. drive demand.
Innovation and emphasis on quality and new ideas have boosted the cosmetics market.
Sales CAGR, FY12AFY15E cosmetic companies

Natura 9 .7% CAGR
Sales (in m) FY12A FY13A/E FY14E FY15E
L Occitane 9 .4% (FY12A-FY15E)
Est e Lauder 5 .6 %
Average 5 .4%
Natura 1,530 1,691 1,838 2,021 9.7%
Shiseido 4.7% LOccitane 1,043 1,079 1,224 1,367 9.4%
Beiersdorf 4.1%
Este Lauder 7,050 7,389 7,817 8,291 5.6%
L Or al 3.3%
Coty 1.0% Shiseido 4,792 5,196 5,361 5,495 4.7%
Beiersdorf 6,040 6,141 6,421 6,816 4.1%
LOral 22,463 22,977 23,397 24,738 3.3%
Coty 3,347 3,374 3,335 3,404 1.0%
Notes:
Figures for 2013 are estimated or Average 5.4%
actual depending on their availability
Median 4.7%
as of the date of this study.
Figures are converted into euros Maximum 9.7%
using exchange rates as of 31 March
2014. (Source: Capital IQ)
Minimum 1.0%
Source: Data based on consensus of several brokers reports for

each company.

B Operating aggregates The luxury sample confirmed last years healthy EBITDA
of 23.7%, with further marginal growth expected
Most of the companies are expected to slightly improve their operating margin in the coming years,
EBITDA remains largely above 20% with some
driven by:
notable exceptions higher than 30%.
DCF and valuation

Volume growth (which implies higher SG&A leverage)
parameters
Higher proportion of retail in the sales mix leading to higher margins
Refocusing on efficiencies (declared by most of players)
Average EBITDA margin, FY12FY15E luxury companies

Average ratio
Herms 35 .6 % EBITDA margin FY12A FY13A/E FY14E FY15E
Moncler 32.9 % (FY12A-FY15E)
Prada 32.2% Herms 35.5% 36.0% 35.4% 35.7% 35.6%
Michael Kors 31.9 %
Moncler 33.0% 33.0% 32.6% 32.9% 32.9%
Coach 31.9 %
Prada 31.9% 31.9% 32.3% 32.7% 32.2%
Swatch 29 .5 %
Michael Kors 31.4% 32.3% 31.9% 32.2% 31.9%
Richemont 27.9 %
Burberry 25 .9 % Coach 34.5% 33.2% 29.9% 29.8% 31.9%
Tod s 25 .1% Swatch 28.7% 31.0% 28.7% 29.5% 29.5%
LVMH 25 .0% Richemont 27.7% 27.2% 28.1% 28.5% 27.9%
Tiffany 24.6 % Burberry 27.6% 25.7% 25.4% 24.9% 25.9%
Average 24.0% Tods 25.4% 24.0% 25.3% 25.8% 25.1%
Hugo Boss 23.3% LVMH 24.7% 24.5% 25.2% 25.5% 25.0%
Tumi 22.0%
Tiffany 22.7% 23.9% 25.4% 26.2% 24.6%
Kering 21.6 %
Hugo Boss 22.3% 23.1% 23.6% 24.3% 23.3%
*Kering margin for FY12A- Tumi 20.9% 21.5% 22.7% 22.8% 22.0%
Ralph Lauren 20.2%
Luxottica 20.0% FY15E excludes numbers for Kering* 21.2% 21.0% 21.7% 22.5% 21.6%
Brunello Cucinelli 17.9 % Fnac, Redcats, Conforama Salvatore Ferragamo 19.8% 20.9% 22.0% 23.1% 21.4%
Chow Tai Fook 13.6 %
and CFAO. Ralph Lauren 19.7% 19.2% 20.4% 21.4% 20.2%
Safilo 11.1% Note: The 2013 EBITDA margin is Luxottica 18.7% 19.5% 20.5% 21.2% 20.0%
computed on the basis of either
Hengdeli 10.0% Brunello Cucinelli 15.7% 18.6% 18.4% 18.8% 17.9%
actual or estimated figures for 2013
sales, depending on their availability. Chow Tai Fook 13.2% 13.2% 13.7% 14.0% 13.6%
As some groups are listed under Safilo 9.9% 10.0% 11.8% 12.9% 11.1%
different jurisdictions around the
Hengdeli 12.6% 8.0% 9.6% 9.8% 10.0%
world, they may use different GAAP,
and therefore a direct comparison Average 23.7% 23.7% 24.0% 24.5% 24.0%
of EBITDA may be less meaningful Median 22.7% 23.9% 25.2% 24.9% 24.6%
than if their results were presented
Maximum 35.5% 36.0% 35.4% 35.7% 35.6%
Source: Data based on consensus of several brokers reports for under the International Accounting
each company. Standards. Minimum 9.9% 8.0% 9.6% 9.8% 10.0%

B Operating aggregates Cosmetic companies show a solid average EBITDA of 17% that is
expected to grow, although at slightly lower rates than those for
luxury companies
Like luxury companies, most cosmetic companies are expected to improve their operating margin in the
Notwithstanding its recent significant
coming years.
growth, Natura still outperforms the samples
profitability The key drivers of margin growth are:
Operational efficiencies
Consumers aspiring to increasingly high levels of quality
Average EBITDA margin, FY12AFY15E cosmetics companies

Natura 23.1% Average ratio
EBITDA margin FY12A FY13A/E FY14E FY15E
L Or al 20.7% (FY12A-FY15E)
Est e Lauder 18.7%
L Occitane 17.9 % Natura 23.6% 22.7% 23.0% 23.1% 23.1%
Average 17.4% LOral 20.2% 20.8% 20.7% 21.1% 20.7%
Coty 15 .8%
Este Lauder 17.4% 18.6% 19.1% 19.7% 18.7%
Beiersdorf 15 .7%
Shiseido 10.2% LOccitane 19.3% 16.3% 17.8% 18.2% 17.9%
Note: The 2013 EBITDA margin is
computed on the basis of either Coty 13.7% 14.5% 17.3% 17.7% 15.8%
actual or estimated figures for 2013
sales, depending on their availability.
Beiersdorf 14.7% 15.0% 16.3% 16.8% 15.7%
As some groups are listed under Shiseido 9.4% 10.2% 10.6% 10.8% 10.2%
different jurisdictions around the
world, they may use different GAAP, Average 16.9% 16.9% 17.8% 18.2% 17.4%
and therefore a direct comparison
Median 17.4% 16.3% 17.8% 18.2% 17.9%
of EBITDA may be less meaningful
than if their results were presented Maximum 23.6% 22.7% 23.0% 23.1% 23.1%
under the International Accounting
Standards.
Minimum 9.4% 10.2% 10.6% 10.8% 10.2%

each company.

B Operating aggregates Capex sales ratios for the luxury industry ranges from 5% to 6%,
based on historical and estimated figures
Prada by far outperforms sample capex ratio due to its recent strong focus on retail business, mainly
carried out in 2012 and 2013 following its listing on the Hong-Kong Stock Exchange.
DCF and valuation

parameters
Average capex ratio, FY12AFY15E luxury companies
Prada 10.4% Average ratio
Capex ratio FY12A FY13A/E FY14E FY15E
Brunello Cucinelli 8.2% (FY12A-FY15E)
Burb erry 8.2%
Prada 10.1% 15.3% 8.2% 7.8% 10.4%
Michael Kors 7.1%
Brunello Cucinelli 9.1% 9.3% 8.6% 5.7% 8.2%
R ichemont 6 .6 %
Burberry 8.8% 8.4% 8.0% 7.6% 8.2%
Hugo Boss 6 .4%
Michael Kors 6.0% 8.1% 7.2% N/A 7.1%
Herms 6 .2%
Richemont 5.9% 7.2% 7.0% 6.1% 6.6%
Swatch 6 .0%
Hugo Boss 7.0% 7.1% 5.8% 5.5% 6.4%
LVMH 5 .8%
Herms 7.5% 5.6% 5.9% 5.6% 6.2%
Average 5 .6 %
Swatch 6.0% 6.6% 5.7% 5.7% 6.0%
Salvatore Ferragamo 5 .5 %
LVMH 6.1% 5.7% 5.7% 5.5% 5.8%
Kering 5 .2%
Salvatore Ferragamo 5.1% 6.5% 5.3% 5.0% 5.5%
Moncler 5 .2%
Kering 4.5% 6.8% 4.8% 4.8% 5.2%
Tif f any 5 .2%
Moncler 5.4% 5.8% 4.7% 5.0% 5.2%
Tod' s 5 .1%
Tiffany 5.5% 5.1% 5.2% 5.0% 5.2%
Coach 5 .1%
Tods 4.8% 5.0% 5.8% 4.9% 5.1%
R alph Lauren 5 .1%
Coach 3.9% 4.8% 5.7% 6.0% 5.1%
TU MI 5 .0%
Ralph Lauren 4.0% 5.5% 6.1% 4.8% 5.1%
Luxottica 4.9 %
Tumi 5.2% 5.3% 5.2% 4.2% 5.0%
Safilo 2.7%
Luxottica 5.3% 5.1% 4.9% 4.6% 4.9%
Hengdeli 1.8%
Safilo 2.2% 2.5% 3.1% 3.2% 2.7%
Chow Tai Fook 1.4%
Hengdeli 3.7% 0.9% 1.4% 1.2% 1.8%
Chow Tai Fook 2.0% 1.5% 1.1% 0.9% 1.4%
Average 5.6% 6.1% 5.5% 5.0% 5.6%
Note: The 2013 capex ratio is Median 5.4% 5.7% 5.7% 5.0% 5.2%
computed based on either actual or
Maximum 10.1% 15.3% 8.6% 7.8% 10.4%
Source: Data based on consensus of several brokers reports for estimated figures for 2013 sales,
each company. depending on their availability. Minimum 2.0% 0.9% 1.1% 0.9% 1.4%

B Operating aggregates Overall the cosmetics industrys capex ranges from 4.5% to 5%
which has been elevated by those with retail networks
LOccitane and Natura capex ratios outperform the sample due to their retail profiles.
Average capex ratio, FY12AFY15E cosmetics companies

L Occitane 6 .6 % Average ratio
Capex ratio FY12A FY13A/E FY14E FY15E
Natura 6 .4% (FY12A-FY15E)
Average 4.7%
Est e Lauder 4.5 %
LOccitane 8.9% 7.4% 5.4% 4.8% 6.6%
L Or al 4.5 % Natura 6.8% 7.6% 6.1% 5.1% 6.4%
Coty 4.1%
Este Lauder 4.3% 4.5% 4.6% 4.6% 4.5%
Shiseido 3.8%
Beiersdorf 2.8% LOral 4.2% 4.6% 4.9% 4.2% 4.5%
Coty 3.8% 3.6% 5.1% 4.0% 4.1%
Shiseido 2.6% 4.4% 4.2% 4.1% 3.8%
Beiersdorf 2.5% 3.5% 2.7% 2.6% 2.8%
Average 4.7% 5.1% 4.7% 4.2% 4.7%
Median 4.2% 4.5% 4.9% 4.2% 4.5%
Note: The 2013 capex ratio is
computed based on either actual or Maximum 8.9% 7.6% 6.1% 5.1% 6.6%
estimated figures for 2013 sales,
depending on their availability.
Minimum 2.5% 3.5% 2.7% 2.6% 2.8%

each company.

B Operating aggregates EY luxury and cosmetics sample:

summary of operating aggregates
Average sales CAGR, FY12AFY15E Average EBITDA margin, FY12AFY15E Average capex ratio, FY12AFY15E
Prada 10.4%
Michael Kors 32.7% Herm s 35.6%
DCF and valuation

Brunello Cucinelli 8.2%
Moncler 32.9%
parameters
Chow Tai Fook 18.9%
Burberry 8.2%
Moncler 17.0% Prada 32.2%
Michael Kors 31.9% Michael Kors 7.1%
Tumi 16.6%
Coach 31.9% L' Occitane 6.6%
Brunello Cucinelli 13.6%
Swatch 29.5% Richemont 6.6%
Burberry 12.1%
Richemont 27.9% Natura 6.4%
Hengdeli 10.8%
Burberry 25.9% Hugo Boss 6.4%
Herm s 9.9%
Tod' s 25.1% Herm s 6.2%
Natura 9.7%
LVMH 25.0% Swatch 6.0%
L' Occitane 9.4%
Tiffany 24.6% LVMH 5.8%
Average 8.9%
Hugo Boss 23.3% Salvatore Ferragamo 5.5%
Prada 8.8%
Natura 23.1% Average 5.3%
Average 22.3% Kering 5.2%
Swatch 8.5%
Tumi 22.0% Moncler 5.2%
Tiffany 7.4%
Kering 21.6% Tiffany 5.2%
Richemont 7.4%
Salvatore Ferragamo 21.4% Tod' s 5.1%
Ralph Lauren 7.3%
L' Or al 20.7% Coach 5.1%
Hugo Boss 7.2%
Ralph Lauren 20.2% Ralph Lauren 5.1%
LVMH 6.2%
Luxottica 20.0% Tumi 5.0%
Est e Lauder 5.6%
Est e Lauder 18.7% Luxottica 4.9%
Luxottica 5.5%
L' Occitane 17.9% Est e Lauder 4.5%
Shiseido 4.7%
Brunello Cucinelli 17.9% L' Or al 4.5%
Kering 4.6%
Coty 15.8% Coty 4.1%
Tod' s 4.1%
Beiersdorf 15.7% Shiseido 3.8%
Beiersdorf 4.1%
Chow Tai Fook 13.6% Beiersdorf 2.8%
afilo 3.4%
afilo 11.1% afilo 2.7%
L' Or al 3.3%
Shiseido 10.2% Hengdeli 1.8%
Coach 2.2%
Hengdeli 10.0%
Chow Tai Fook 1.4%
Coty 1.0%
EBITDA margin Capex ratio
Sales CAGR 22.3% 5.3%
8.9%
Low High Low High
Low High Industry benchmark Industry benchmark
Industry benchmark

C Advertising expenses and Advertising remains a key driver of the industry

net working capital analysis
Marketing and advertising represent a significant cost component for both global luxury and cosmetics
manufacturers.
Advertising expenses will remain a major operating topic, especially for companies focusing on top-line
growth and brand awareness sustainability.
Cosmetics advertising expenses are significantly influenced by their mass-market positioning.
Luxury companies, in addition to advertising, promote their brands via flagship stores and ambassadors.
Selected companies advertising expenses as a % of sales, FY13A/E
35 .0%
30.0%
30.0%
27.5 %
24.3%
25 .0%
23.0% 23.1%
20.0%
in %
15 .0%
11.4%
10.7%
10.0% 9 .0% 9 .3%
6 .2% 6 .2% 6 .6 %
5 .6 % 5 .7%
4.8%
5 .0%
2.0% 2.5 %
0.0%
Coach
Prada
Herms
Tif f any
Moncler
Salvatore
Ferragamo
Luxottica
R ichemont
Safilo
LVMH
L Occitane
Shiseido
Coty
Este Lauder
L Oral
Tumi
Beiersdorf
Luxury companies Cosmetics companies

C Advertising expenses and Net working capital requirements for jewelry and watches
companies are higher than for other luxury companies
As shown in the graph below, the jewelry and watches business is the most working-capital-intensive of all
luxury segments.
DCF and valuation

Hard luxuries (watches and jewelry) rely heavily on wholesale channels.
parameters
80%
Net work ing capital as a % of sales ( %)
2015
2015
6 0%
2012 2012
2015
2012 2015
40% 2015
2012 2015
2012 2015 2015
2015 2014
20% 2012 2015 2015
2012 2012 2015 2015 2015
2012 2015 2015 2012 2015 2012 2015 2012
2012 2012 2012 2015
2012 2012 2012 2012 2012 2015
0% 2012
- 20%
Swatch Tif f any Chow Tai Hengdeli R ichemont Tod s Safilo Brunello LVMH Michael Salvatore Hugo Boss TU MI R alph Moncler Herms Prada Burb erry Coach Luxottica Kering
Fook Cucinelli Kors Ferragamo Lauren
Notes:
Net working capital (NWC) is determined as current assets less current liabilities (excluding cash or debt-related elements).
Michael Kors NWC only available for FY12A-FY14E.

C Advertising expenses and Net working capital requirements for cosmetics companies
appear more limited compared to other luxury segments, with a
stable trend over the period
Net working capital requirements are very heterogeneous in the cosmetics segment.
Companies levels of requirements are expected to remain mainly stable over the FY12A-FY15E period.
However, Natura net working capital is expected to decrease as a % of sales.
16 %
2012
14% 2015
Net work ing capital as a % of sales ( %)
2015
12% 2012
2015
10%
2015
8%
2012 2012
6 % 2012
4% 2015 2015
2015
2% 2012
0%
- 2%
2012
- 4%
-6 %
Shiseido L Occitane Est e Lauder Beiersdorf Natura L Or al Coty
Note: Net working capital (NWC) is determined as current assets less current liabilities (excluding cash or debt-related elements).

D SOTP and segment analyses LVMH: sum of the parts (SOTP)
LVMH SOTP analyses imply a total enterprise valuation of 85.3b in FY14E.

The fashion and leather segment is the largest contributor both in terms of sales (35%) and EBIT (53%).
DCF and valuation

parameters
Sales breakdown, FY14E (in b) EBIT breakdown, FY14E (in b) Enterprise value breakdown, FY14E (in b)
9 .7 31.5
1.0 6 .6
16 %
31% 1.4
4.3 5 .6 85 .3
21%
0.4 12.4 7%
14% 15 %
2.9 0.4 6 % 13.7
3.4 7%
3.8 9 % 5 .4 16 %
6 .1 6 %
12% 45 .1
11.0 7%
5 3%
5 3%
35 %
( 0.1) ( 3.1)
( 0.3)
- 2% - 4%
Fashion Perf umes Watches Wines Selective Eliminations Herms Total

Fashion Perf umes Watches Wines Selective Eliminations Total Fashion Perf umes Watches Wines and Selective Eliminations Total and and and and retailing stak e
and and and and retailing and and and spirits retailing leather cosmetics j ewelry spirits
leather cosmetics j ewelry spirits leather cosmetics j ewelry goods
goods goods
Luxury products Luxury products Luxury products

(excluding spirits) (excluding spirits) (excluding spirits)
Source: SOTP based on EY analysis and on the following brokers reports: Raymond James (31 January 2014), Barclays (31 January 2014),
Socit Gnrale (31 January 2014) and Kepler Cheuvreux (11 December 2013).

D SOTP and segment analyses Kering: SOTP
Kering SOTP analyses imply a total enterprise value of 25.5b in FY14E.

Contributing around 98% of the total EBIT for 68% of sales, Gucci Group is the most profitable segment in
terms of operating margin.
0.3 0.0 10.1

2.9 2.2 0.3 25 .5
0.1% 0.1 0.0 1.8
3%
24.9 9 % 1.0%
1.8 8% 1.0%
29 %
6 .9
9 8% 9 8%
6 8%
( 0.1) ( 1.9 )
- 7% - 7%
Gucci Group Puma Volcom Eliminations Total
Gucci Group Puma Volcom Eliminations Total Gucci Group Puma Volcom Eliminations Total
Luxury Sports & Lifestyle Luxury Sports & Lifestyle Luxury Sports & Lifestyle
Division Division Division Division Division Division
Source: SOTP based on EY analysis and on the following brokers reports: Credit Suisse (28 February 2014), Deutsche Bank (24 February 2014),
Socit Gnrale (24 February 2014) and JP Morgan (21 February 2014).

D SOTP and segment analyses Kering: further analysis of Gucci Group through SOTP approach
Gucci Group SOTP analyses imply an enterprise value of 24.9b in FY13E.

Within the Gucci Group segment, the Gucci brand alone represents 53% of the top line and 65% of EBIT in
DCF and valuation

FY14E, meaning that the Gucci brand is expected to constitute the largest segment within the Gucci Group
parameters
and is also the most profitable in terms of operating margin.
1.5 6 .9 1.8 3.0 24.9

0.2
10% 12%
0.1 1.5
22%
0.4 5 %
5 .6 6 %
0.6
9 % 21%
1.1 23%
1.1
14.8
16 %
3.6
6 5 %
5 9 %
5 3%
Gucci b rand Bottega Veneta Y SL Other b rands Gucci Group Gucci b rand Bottega Veneta Y SL Other b rands Gucci Group Gucci b rand Bottega Veneta Y SL Other b rands Gucci Group
Source: SOTP based on EY analysis and on the following brokers reports: Credit Suisse (28 February 2014), Deutsche Bank (24 February 2014),
Socit Gnerale (24 February 2014) and JP Morgan (21 February 2014).

D SOTP and segment analyses LOral: segment analysis
The LOral Luxe division accounts for 26% in the total sales in FY13A.
This division is expected to register a sales growth at a CAGR of 6% over the 2012-16E period, when
its operating income is anticipated to grow from 1,077m to 1,493m (or at a CAGR of 9%) over the
same period.
The LOral Luxe division will remain one of the biggest divisions within LOral.
Sales breakdown, FY12AFY16E (in b) EBIT breakdown, FY12AFY16E (in b) EBIT margin, FY12A-FY16E (in %)
30 6 25 %
4.7
4.5
25 .7 5 %
24.9 4.1 21%
6 % 21%
8% 5 3.9 8% 20% 20%
25 23.6
23.0 7% 3.7 19 %
8% 20%
22.5 6 % 5 %
7% 18%
7% 6 % 18%
5 % 9 %
7% 18%
6 % 6 % 9 %
6 % 17%
7% 4 32% 16 %
20 8% 30%
25 %
CAGR 26 %
30% 15 %
26 % 6 %
25 % 30% CAGR
24%
29 % 9 %
15 3
10%
10 2 5 5 %
49 % 5 5 %
48% 5 6 %
48% 48% 48% 5 5 % 5 6 %
5 %
5 1
14% 13% 13% 13% 12% 17% 16 % 16 % 15 % 15 %
0 0 0%
( 16 %) ( 16 %) ( 15 %) ( 15 %) ( 15 %)
-1
2012A 2013A 2014E 2015 E 2016 E 2012A 2013A 2014E 2015 E 2016 E 2012A 2013A 2014E 2015 E 2016 E
Prof essional products Consumer products L Or al Luxe Prof essional products Consumer products L Or al Luxe L Or al Luxe Total
Active cosmetics Other Active cosmetics Other Eliminations
Source: Analyst research (H2 2012)

E Trading multiples Level of multiples illustrates the growing attractiveness of the

luxury sector
In the luxury sector, expected strong growth and margin improvements are reflected in valuations of
trading multiples
DCF and valuation

The expected evolution of valuation multiples is the result of an improvement in the top-line growth as well
parameters
as in the operating efficiency of the luxury companies.
The average top-line growth for luxury companies is expected to average around the 10% level over
FY 2012A15E.
EV/sales (FY12A-15E) EV/EBITDA (FY12A-15E) Price to earnings (FY12A-15E)
4.0x 29 .4x
3.7x 18.0x 30.0x 28.2x
3.5 x 15 .3x
3.2x 3.3x 25 .0x
15 .0x 25 .0x
3.0x 2.9 x 13.3x
3.0x 21.8x
2.8x 12.7x 21.0x
2.6 x
11.8x 11.8x
2.5 x 18.8x
12.0x 10.9 x 20.0x 18.2x
2.5 x 10.4x
16 .8x
9 .7x
2.0x 9 .0x 15 .0x
1.5 x
6 .0x 10.0x
1.0x
3.0x 5 .0x
0.5 x
0 0 0
2012A 2013A/ E 2014E 2015 E 2012A 2013A/ E 2014E 2015 E 2012A 2013A/ E 2014E 2015 E
Average Median Average Median Average Median
Notes:
The results of 2013 are actual (A) if the financial results are closed and expected (E) if the financial year is not closed yet.

E Trading multiples Sales multiples illustrate the dynamism of cosmetics over the
past years
Cosmetics companies valuation trading multiples are expected to follow the same trend as the one
expected for luxury companies
Sales multiples illustrate continuous improvement in cosmetics companies top line from FY12A to FY15E,
with 2012 average growth of 4.6% expanding to 6.5% in 2015.
EV/sales (FY12A-15E) EV/EBITDA (FY12A-15E) Price to earnings (FY12A-15E)
3.5 x 18.0x
35 .0x
3.0x 30.0x 28.2x

15 .0x
13.8x 13.9 x
13.1x 13.1x 25 .8x 26 .2x
2.4x 24.2x
2.4x
2.5 x 2.3x 11.8x 25 .0x
2.3x 22.7x
2.2x 12.0x 11.0x 22.1x
2.1x 2.1x 10.8x
10.5 x
20.4x 20.2x
2.0x
2.0x 20.0x
9 .0x
1.5 x 15 .0x
6 .0x
1.0x 10.0x
3.0x
0.5 x 5 .0x
0 0 0
2012A 2013A/ E 2014E 2015 E 2012A 2013A/ E 2014E 2015 E 2012A 2013A/ E 2014E 2015 E
Average Median Average Median Average Median
Notes:
The results of 2013 are actual (A) if the financial results are closed and expected (E) if the financial year is not closed yet.

E Trading multiples EY luxury and cosmetics sample:

summary of EV/sales multiples
EV/sales (FY13A/E) EV/sales (FY14E) EV/sales (FY15E)

Herm s 6.3x Herm s 5.6x Herm s 5.1x
DCF and valuation

Michael Kors 6.2x Moncler 5.0x Moncler 4.3x
parameters
Moncler 5.8x Michael Kors 4.9x Michael Kors 4.2x
Brunello Cucinelli 4.2x Brunello Cucinelli 3.7x Brunello Cucinelli 3.3x
Prada 3.7x Prada 3.5x Prada 3.2x
TUMI 3.3x Swatch 3.0x Swatch 2.8x
Hengdeli 3.3x Richemont 3.0x L' Or al 2.8x
Swatch 3.3x L' Or al 2.9x Richemont 2.7x
Richemont 3.2x Tiffany 2.9x Tiffany 2.7x

Tiffany 3.1x TUMI 2.8x Coach 2.5x
Average 3.0x Hengdeli 2.8x Salvatore Ferragamo 2.5x
Salvatore Ferragamo 3.0x Salvatore Ferragamo 2.8x Average 2.5x
L' Or al 3.0x Average 2.7x Tod' s 2.5x

Luxottica 2.8x Tod' s 2.7x Luxottica 2.5x
Tod' s 2.8x Luxottica 2.6x TUMI 2.4x
Hugo Boss 2.7x Coach 2.6x Hengdeli 2.4x
Burberry 2.7x Hugo Boss 2.5x Est e Lauder 2.3x
Est e Lauder 2.6x Est e Lauder 2.5x Hugo Boss 2.3x
Coach 2.5x Burberry 2.4x Burberry 2.2x
Natura 2.5x LVMH 2.3x Beiersdorf 2.1x
LVMH 2.5x Natura 2.3x LVMH 2.1x
Beiersdorf 2.4x Beiersdorf 2.3x Natura 2.1x
Kering 2.3x Kering 2.1x Kering 2.0x
L' Occitane 2.1x L' Occitane 1.9x L' Occitane 1.7x
Ralph Lauren 1.8x Ralph Lauren 1.7x Coty 1.6x
Chow Tai Fook 1.8x Coty 1.7x Ralph Lauren 1.5x
Coty 1.7x Chow Tai Fook 1.6x Chow Tai Fook 1.4x
Shiseido 1.2x Shiseido 1.2x Shiseido 1.1x
afilo 1.1x afilo 0.9x

afilo 0.9x
3.0x 2.5x
2.7x
Low High Low High
Low High
Industry benchmark Industry benchmark
Industry benchmark
Note: Market capitalization is based on a one-month average as of 31 March 2014.

E Trading multiples EY luxury and cosmetics sample:

summary of EV/EBITDA multiples
EV/EBITDA (FY13A/E) EV/EBITDA (FY14E) EV/EBITDA (FY15E)

Brunello Cucinelli 22.6x Brunello Cucinelli 20.3x Brunello Cucinelli 17.6x
Michael Kors 19.3x Herm s 16.0x Herm s 14.3x
Moncler 17.7x Michael Kors 15.5x Moncler 13.2x
Herm s 17.4x Moncler 15.4x L' Or al 13.1x
Beiersdorf 15.9x L' Or al 14.1x Michael Kors 12.9x
Tumi 15.3x Beiersdorf 14.0x Beiersdorf 12.8x
Hengdeli 15.3x Luxottica 12.9x Est e Lauder 11.7x
Luxottica 14.3x Est e Lauder 12.9x Luxottica 11.6x
L' Or al 14.3x Tumi 12.5x Salvatore Ferragamo 11.0x
Salvatore Ferragamo 14.3x Hengdeli 12.5x Tumi 10.8x
Est e Lauder 14.0x Salvatore Ferragamo 12.5x Hengdeli 10.8x
Chow Tai Fook 13.4x Average 11.8x Shiseido 10.5x
Average 13.2x Chow Tai Fook 11.6x Average 10.5x
L' Occitane 13.1x Tiffany 11.3x Tiffany 10.2x
Tiffany 13.0x Shiseido 11.0x Chow Tai Fook 10.0x
Richemont 11.8x Prada 10.9x Prada 9.7x
Hugo Boss 11.8x Richemont 10.6x Tod' s 9.6x
Shiseido 11.8x Tod' s 10.6x Richemont 9.6x
Prada 11.7x L' Occitane 10.6x Swatch 9.5x
Tod' s 11.6x Swatch 10.6x Hugo Boss 9.5x
Coty 11.5x Hugo Boss 10.6x Coty 9.3x
Natura 11.0x Natura 9.9x L' Occitane 9.2x
Kering 10.8x Kering 9.9x Natura 9.0x
Swatch 10.6x Coty 9.8x Kering 8.9x
afilo 10.5x Burberry 8.9x
Burberry 9.6x
Burberry 10.4x Coach 8.5x
LVMH 9.2x
LVMH 10.1x LVMH 8.4x
Coach 8.8x
Ralph Lauren 9.4x Ralph Lauren 7.2x
Ralph Lauren 8.3x
Coach 7.6x afilo 7.0x
afilo 8.1x
13.2x 10.5x
11.8x
Low High Low High
Low High
Industry benchmark Industry benchmark
Industry benchmark
Note: Market capitalization is based on a one-month average as of 31 March 2014.

E Trading multiples Regression analysis: EV/sales multiple vs. EBITDA margin, 2014
and 2015 growth
Analysis shows strong correlation between EV/sales levels and profitability but limited
correlation with growth.
DCF and valuation

parameters
6 .0x Herms 6 .0x Herms
R 2
= 0.5 5 72 R 2
= 0.2201
Moncler Moncler Michael Kors
5 .0x 5 .0x
Michael Kors
4.0x Brunello Cucinelli 4.0x Brunello Cucinelli
2014 EV/ sales

2014 EV/ sales
Hugo Boss Prada Swatch

Salvatore Ferragamo Prada
Hengdeli TU MI Swatch L Or al R ichemont Tif f any Salvatore Ferragamo
3.0x Est e Lauder L Or al Tif f any
Tod s R ichemont Coach 3.0x Luxottica
Coach Tod s Hengdeli
Beiersdorf Luxottica Burb erry LVMH Hugo Boss TU MI
L Occitane LVMH Beiersdorf Burb erry
2.0x
Chow Tai Fook Kerning 2.0x Kering Natura L Occitane
Natura Est e Lauder
Shiseido Coty R alph Lauren Coty R alph Lauren Chow Tai Fook
Shiseido
1.0x Safilo 1.0x Safilo
0% 5 % 10% 15 % 20% 25 % 30% 35 % 40% ( 4.0%) 1.0% 6 .0% 11.0% 16 .0% 21.0% 26 .0% 31.0%
2014 EBITDA margin ( %) 2014 sales growth ( %)
6 .0x 6 .0x
R 2
= 0.5 802 R 2
= 0.26 83
Herms Herms
5 .0x 5 .0x
Moncler Moncler
Michael Kors
4.0x Brunello Salvatore Michael Kors 4.0x
2015 EV/ sales
2015 EV/ sales

Cucinelli Ferragamo Prada Brunello Cucinelli
Tif f any Prada
3.0x Luxottica L Or al Tif f any Swatch Swatch R ichemont
3.0x Tod s
Est e Lauder Coach Salvatore Ferragamo
TU MI Tod s Coach Luxottica TU MI
Hengdeli Est e Lauder LVMH Natura Burb erry Hengdeli
2.0x Beiersdorf Kering LVMH
R ichemont 2.0x Coty
Coty Burb erry Beiersdorf Kering Hugo Boss
Natura L Occitane
Chow Tai Fook R alph Lauren
1.0x Shiseido Hugo Boss Shiseido Chow Tai Fook
R alph Lauren 1.0x Safilo
Safilo
0% 5 % 10% 15 % 20% 25 % 30% 35 % 40% 0% 5 .0% 10.0% 15 .0% 20.0% 25 .0%

2015 EBITDA margin ( %) 2015 sales growth ( %)
Notes: Market capitalization is based on a one-month average as of 31 March 2014. The 2014 growth corresponds to the sales growth rate between FY13E and FY14E, when the 2015 growth corresponds to the sales growth rate between FY14E and FY15E.

F Transaction multiples Transaction multiples in the luxury industry remain at a

significant premium to many other sectors
Transaction multiples illustrate the growing attractiveness of the industry over the past few years.
They also reflect a premium to rarity: indeed, the brands reputed to be on the market are very few, and
the buyers recognize this and agree to pay a higher price to ensure the priority of the deal.
The average sales multiple over the last five years ranged between 0.5x and 1.7x, when the EBITDA
multiple ranged between 6.6x and 15.3x.
EV/sales (FY09-1H14) EV/EBITDA (FY09-1H14)

2.0x 18.0x
1.8x 1.7x 16 .0x

15 .3x
1.6 x 1.6 x
1.6 x
1.5 x 14.0x
1.4x 12.3x
12.0x
1.3x 1.3x 12.0x 11.8x
11.2x
1.2x 1.2x 10.7x
1.2x 10.4x
1.1x 9 .9 x
1.1x 10.0x
1.0x
8.0x 7.5 x
0.8x 6 .6 x
6 .0x
5 .2x
0.6 x 0.5 x 0.5 x 4.8x
4.0x
0.4x
2.0x
0.2x
0.0x 0.0x
2009 2010 2011 2012 2013 1H14 2009 2010 2011 2012 2013 1H14
Average Median Average Median
Source: Capital IQ

F Transaction multiples The M&A deals in the cosmetics industry show similar trend as
the luxury industry
The average sales multiple over the last five years ranged between 1.0x and 2.4x, when the EBITDA
multiple ranged between 6.9x and 16.0x. 1H14 transaction multiples in the cosmetics industry materially
DCF and valuation

differ from the averages of the previous years. Looking at the specific transactions, we note that valuations
parameters
were positively impacted by strategic acquisitions carried out by the major players to foster growth in
emerging markets and broaden the products offering into more innovative segments. In this respect, these
two key themes coupled with the uniqueness of targets have largely increased average valuations.
EV/sales (FY09-1H14) EV/EBITDA (FY09-1H14)

3.0x 20.0x
18.0x
2.5 x 2.4x 16 .0x

16 .0x
14.9 x
14.0x
2.0x
2.0x
1.9 x
1.8x 1.8x 11.7x
1.7x 1.7x 1.7x
12.0x
10.7x
1.6 x 10.2x
10.0x10.1x 10.1x
1.5 x 10.0x 9 .1x
8.8x
1.1x 8.0x
1.0x 6 .9 x
6 .5 x
1.0x 0.9 x
6 .0x
4.0x
0.5 x
2.0x
0.0x 0.0x
2009 2010 2011 2012 2013 1H14 2009 2010 2011 2012 2013 1H14
Average Median Average Median
Source: Capital IQ

2014 sales outlook still solid: Looking at Purchase intent for the next 12 months is
luxurys core Chinese consumer, as well rising across most categories we surveyed
as Korea, Japan, the US and even parts of and across all key emerging markets (except
Europe, there are still reasons to believe for mixed trends in Brazil). Around 50% of
2014 should be at least as strong as 2013 consumers we surveyed plan to purchase
in terms of organic sales growth for the Western brands over the next 12 months,
sector. We believe the outlook for the with sporting goods standing out.
industry sounds optimistic. Global luxury goods, Credit Suisse, February 2014
Global luxury goods, HSBC research, March 2014
Industry overview
A Global luxury goods market
B Global cosmetic goods market
Industry overview
Page 34 DCF and valuation
Industry
parameters
overview
A Global luxury goods market Worldwide growth in the personal luxury goods market falls to
lower single digits after three years of strong double-digit growth
Worldwide personal luxury goods market trend1 Luxury goods demand growth by nationality (2009-15E)2
300 13.1% 15 % 40%
CAGR :
+ 4- 6 %
25 0 11.0%
10.4% 30%
10%
200 8.1% 8.2% 245 - 25 5
6 .9 % 217
212 20%
15 0 19 2
16 7 173
15 9 15 3 5 %
147 10%
100
Growth ( %)
b illion
170 2.4%
%
5 0 0%
0%
0
- 1.8% - 10%
-5 0
-5 %
- 20%
- 100
- 8.4%
- 15 0 - 10% - 30%
2005 2006 2007 2008 2009 2010 2011 2012 2013e 2016 e 2009 2010 2011 2012 2013e 2014e 2015 e
Mark et size Growth Chinese North American European J apanese Other
Sources: Bain & Company and Fondazione Altagamma and other selected research.
Notes: 1) Worldwide Markets Monitor, October 2013, and Worldwide Luxury Markets Monitor, spring 2014, Bain & Company
and Fondazione Altagamma.
2) Luxury Outlook 2014, Deutsche Bank, January 2014.

DCF
Industry
and overview
valuation parameters Page 35
Global luxury goods market
Industry overview
The worldwide personal Retail is still an important In 2013, the US Demand from Chinese
luxury goods market is growth driver, mainly experienced a revival in consumers is expected to
estimated to have grown fueled by network demand and the trend downward due to
by 2.4% in 2013.
expansion through the
Americas (+7%) ongoing austerity
However, at constant
opening of ~600 new
directly operated stores.
European The online luxury goods
market continued its surpassed Asia
measures, which seem to
have curbed luxury
exchange rates, the
market with 6.0% growth
The organic growth consumer successful run, with its (+5%) as luxurys spending by
has outpaced the real
decelerated as more
focus was placed on
demand is share of online
penetration increasing to
main growth engine, with
10%15%.
growth of 5.0% recorded
in 2012.
in-store renovations in expected 4.5% in 2013 from
positive trends expected
to continue in 2014.
key markets versus new to stabilize 3.6% recorded in the The fluctuations in the
store openings. following expectations
of an improving
previous year. The euro penalized the
The industry experienced brands are increasingly market performance,
the majority of its
economic
environment and
leveraging the channel
for both sales and
with Japanese yen
demand coming from recovery in most contributing over half of
younger premium communication. the differential between
European countries
customers, emerging with the exception of real and nominal growth.
economies and a reviving Italy and France.
US luxury market.

Industry
parameters
overview
A Global luxury goods market Luxury goods market growth by geography
US: Strong consumer confidence among the affluent class and an improving wealth effect have sustained US
luxury spending and should continue to do so in 2014.
Japan: Japanese luxury consumers repatriated demand to their domestic market in 2013, as a result of the
weak yen. We expect this trend to continue in 2014; however, some uncertainties can be linked to
consumers reactions to luxury prices increasing in response to the FX move and the increase in VAT.
Luxury goods, Deutsche Bank, April 2014
Luxury goods market growth by geography1

(constant exchange rates) 1 Key currency fluctuations impacting luxury purchasing patterns
14%
12%
12%
Y ear- on- year growth
10%
10% 10%
9 % The yens massive devaluation, which started in 2013, has partially slowed, resulting in repatriated Japanese
8% 7% luxury spending from South Korea, Europe and the US, greatly benefiting local consumption.
6 % 5 % 5 % 5 %
4% 4% 4%
4% 3% 3% 3% Russias ruble devaluation has worsened since 2013 due to its lower credit rating and geopolitical turbulence,
2%
0%
which has deepened its economic slowdown, reducing Russian international purchases (especially in Europe).
- 2% - 1% The Indonesian rupiah and Brazilian real have weakened amid slower economic growth and persistent inflation,
Europe Americas J apan Asia-Pacific R est of the world
2012A 2013E 2014F reducing purchases in Europe and Singapore and, to a lesser extent, the US.
Real GDP growth by selected market (2012-15E)2

2 Digital sales driving growth
(In %) FY12A FY13E FY14E FY15E
Global 2.6 2.5 3.0 3.5
Online penetration continued to expand at a rapid pace and reached 4.5%, supported by 30% y-o-y growth in
US 2.8 1.9 2.4 3.0
real terms.
Eurozone (0.6) (0.4) 1.1 1.5
The online luxury market is enormously skewed to the US, with the Americas accounting for ~60% of the
Japan 1.4 1.5 1.4 1.3
worldwide luxury market and accessories having the highest online penetration.
UK 0.3 1.7 2.8 2.6
A number of players have entered the online arena, each having sizable share of the overall market: Brands.com
CEE* 4.6 4.2 4.0 5.9
(35%), E-Tailers (30%) and Retailers.com (35%)
Brazil 1.0 2.3 1.9 2.9
Russia 3.4 1.3 1.0 1.7 M-commerce currently represents one-third of traffic and over 10% of sales for some brands.
BRIC
India 4.7 4.6 5.3 6.0 economies
China 7.7 7.7 7.5 7.6
*Central and Eastern Europe
Sources: Bain & Company and Fondazione Altagamma and other selected research.
Notes: 1) Worldwide Markets Monitor, October 2013, and Worldwide Luxury Markets Monitor, Spring 2014, Bain & Company and Fondazione Altagamma.
. 2) IHS Global Insights.

Industry
DCF and overview
A Global luxury goods market China becoming a mature market with consolidating growth rates
Mainland Chinese personal luxury Top three global personal luxury goods
goods markets (2011-2014F)1 markets (2013E)1 1 Sluggish growth in Greater China
Industry overview
Second position glob ally af ter
including Hong Kong The Chinese market is expected to maintain low-single-digit growth in 2014, with a
15 .3 15 - 16 corruption crackdown still reducing sales, especially impacting gifting.
16 15 .0 70 6 2.5
14
Significant price differential vs. abroad is driving purchases overseas, with luxury
12.5 6 0
12
retail expanding at slower pace.
5 0
10 Primary drivers of growth include a sustained domestic market, improved
b illion
40
b illion
8 performance from Hong Kong and Macau, more spending from top foreign markets
6
30 23.0 in new geographies (South Korea, US West Coast), and sustained spending in
17.2
4
20 Europe.
2 10 Brands are reshaping their strategies, pushing high-end products and attempting
0 0
to improve service levels.
2011 2012 2013E 2014F U S Mainland China J apan
and Hong Kong
Share of urban households in China2 2 Chinese consumers confirm dominance as top global customer
100%
16
29
80%
22
In 2013, Chinese consumers accounted for about 29% of global luxury sales and
6 0% are heading to become nearly one-third of the luxury market.
40% 5 4
5 4
The Chinese middle class is evolving, with more higher-income households, which
20% is favorable for luxury spending.
14
0% 3 9 By 2020, Chinese consumers are expected to add 70b80b (or 30%40%) to
2012 2022E
Affluent Upper middle class Mass middle class Poor
luxury demand.
The increase in the number of wealthy households and of their average disposable
Sources: Bain & Company and other selected research income is expected to drive growth levels in the teens in luxury demand in China,
Notes: 1) Worldwide Markets Monitor, October 2013, and Worldwide Luxury Markets Monitor, Spring 2014, Bain & Company
even assuming subdued HNWI spending due to government austerity measures.
and Fondazione Altagamma.
2) Luxury Outlook 2014, Deutsche Bank, January 2014.

Industry
parameters
overview
A Global luxury goods market Accessories continues to lead the pack amid polarization of
consumption across categories
Global personal luxury goods market Growth rates of global personal luxury
by product type (2013E)1 goods market by product type1 2 Apparel: high-end segment outperforming
4% 3%
Other 0% Mens ready-to-wear (RTW) is outperforming womens in most markets, except for
Accessories
20% Hard luxury 4% formalwear in Mainland China.
28% 2%
Apparel
Beauty 13% Womens RTW witnessed down trading in mature markets, with more impact from
Hard luxury 2%
8%
the competition from premium brands and apparel retailers.
Apparel 1%
Beauty
23%
16 %
The high-end segment has shown super-performance in all its different shades,
Other Accessories
25 % 4% including made-to-measure and sartorial, absolute luxury and first lines.
0% 5 % 10% 15 % 20%
Brands are increasingly investing in the segment by opening dedicated stores.
Sources: Bain & Company and other selected research 2012 2013
The online penetration is in line with the overall average of the sector.
Note: 1) Worldwide Markets Monitor, October 2013, and Worldwide Luxury Markets Monitor, Spring 2014, Bain & Company and
Fondazione Altagamma.
1 Accessories: resilient growth 3 Hard luxury: strong polarization
Leather goods have been growing consistently over the years, with the mens Strong polarization is observed as both high-end jewelry and affordable grow
segment recording double-digit growth. significantly.
Top players are investing in leather suppliers and animal farms as last year witnessed Silver and costume jewelry from fashion brands performed well thanks to the
the strongest focus on ultimate luxury, with precious skins ruling. growing middle class in emerging markets, with the latter becoming more of a
Shoes represent one of the fastest-growing categories, with both mens and womens fashion item.
categories witnessing solid performance driven by specialist players. The demand for watches is slowing down in real terms as over-exposed brands are
The online channel has been leveraged well by accessories segment, which has the suffering in Mainland China.
highest online penetration, with shoes above 10%. The accessible watch segment is showing the highest dynamism.
The eyewear market is pegged at 10b; eyewear specialist and house brands make up Online penetration for hard luxury is far below average, with specialist
a large portion, with absolute/niche players showing the highest growth. watchmakers almost absent from the channel.

Industry
DCF and overview
Industry overview
Industry
parameters
overview
B Global cosmetic goods market Worldwide cosmetics market is solid, dynamic and fast-moving
Global cosmetics industry market growth, YOY (2004-13)1 Global cosmetics market segmentation by products
and geographies (2013)1
200 6 .0%
1%
4.9 % 5 .0% 4.6 % Sk in care
4.6 %
4.2% 5 .0%
11%
Hair care
15 0
3.8% 3.8%
3.4% 34% Mak eup
4.0% 13%
2.9 %
Fragrances
b illion
100 3.0% 17%
%
Hygiene products
24%
Oral cosmetics
2.0%
1.0%
5 0
3%
1.0%
Asia- Pacific
123 127 134 141 145 147 15 3 16 1 16 8 175
8%
0 0.0% Western Europe
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 33%
13%
North America
Cosmetics mark et Growth %
Latin America
21%
Eastern Europe
22%
Af rica, Middle East
Sources: LOral Annual Report 2013 and other selected research.

Note: 1) LOral estimates of worldwide cosmetics market based on manufacturer net selling prices. Excluding soap, toothpaste, razors and blades. Excluding currency fluctuations.

Industry
DCF and overview
Global cosmetic goods market
Industry overview
The global cosmetics The combined effects of The beauty market is set By 2020, it is estimated
market grew by an population, to double in size in the that more than half of
estimated 3.8% urbanization, progress
in infrastructure and
next 10 to 15 years, and
all the worlds regions
consumers will be
located in tropical zones
during 2013, which
growth in world GDP will The consumer behavior The top trio of countries will grow, with China, the with hot, humid climates,
was slightly lower than
the historical average
continue to drive the has not changed since
China and
US, Brazil, India and and some 60% of the
over the past 15 years
market.
the
the crisis, and
Brazil
Japan expected to
(new markets) become the top markets.
worlds population will
live in major urban
market has
estimated at
and the US
The population with centers affected by
approximately 4.1%.
pollution. These trends
continued
access to modern
(a mature market) will further boost the
cosmetics could grow by
contributed almost
50% over the next 20
years, boosted by the
to expand half the
demand for
quality
rapid rise of the urban
middle class in the new
steadily. growth of the cosmetic
markets.
worldwide cosmetics
market in 2013. products.
Contact us
Glossary
Industry
parameters
overview
B Global cosmetic goods market Cosmetics industry remained resilient even in a difficult
economic period
1 Resilient demand 3 Widespread growth
Demand for cosmetics has not been impacted by the economic crisis, with The market was buoyant on all continents, even in Western Europe, with growth of
consumers aspiring for better quality products and eager for new technology nearly 3.0%.
and ideas. From a geographic viewpoint, the new markets continue to attain increasing levels
The beauty market is a supply-driven market fueled by innovation, and of growth. Excluding Japan, they represented 80% of worldwide market growth due
consumers are always looking for quality, performance and perceived results. in equal shares to Asia-Pacific and Latin America.
The market has been bolstered by the rise of middle classes all over the world. With growth of 4.6%, the selective market continued to grow at a steady pace in
2013, bolstered by Asia. Travel retail contributes 24% of global growth.
With growth of 3.9%, mass-market sales tailed off, particularly due to lagging
demand in the US and Asia.
2 Dermocosmetics: huge potential 4 Digital media: the game changer
Dermocosmetics products that combine cosmetic and dermatological action to Digital media has emerged as a crucial dimension for the brands, with beauty
preserve the health and beauty of skin and hair grew by 5.0% in 2013. product consumers constantly looking for tips and recommendations.
Traditionally strong in Western Europe, the segment is witnessing its development The internet is increasingly integrated into the buying process in a multi channel
accelerate in North America and the new markets context with rise of digital media and social networks.
The dynamism stems from the strong consumer appeal of products combining With consumer opinions just a click away, they influence final choices both online
efficacy and safety with good value. and in the store.
The distribution channels that earlier included traditional pharmacy and The online medium helps maintain a more direct and participative relationship with
parapharmacies channels have now expanded to drugstores, dermacenters in their consumer-ambassadors while providing them with richer experiences and
department stores and medi-spas. services attuned to their vision of beauty.
Sources: LOral Annual Report 2013 and other selected research.
Notes: 1) LOral estimates of worldwide cosmetics market based on manufacturer net selling prices. Excluding soap, toothpaste, razors and blades. Excluding currency fluctuations.

DCF
Industry
and overview
Industry overview
The longer-term outlook also remains positive
as the world population with access to
cosmetics in emerging markets is estimated
to increase by 50%.
Paul Wood
Partner, Advisory
Methodology
EXECUTIVE SUMMARY
Approach
SOTP analyses
DCF AND VALUATION PA-

RAMETERS
Sample selection
Focus on Moncler, Coty, Tumi, Chow

Tai Fook and Hengdeli
INDUSTRY OVERVIEW
Methodology
AND SPECIFIC ANALYSES
SAMPLE SELECTION
EY
GLOSSARY
Contact
Glossary
EXPERTS
us
Page 46 Methodology
Approach
There are many criteria to analyze the operating and financial performances of listed companies.
The aim of this survey is not to conduct a detailed analysis of the selected companies.
The approach implemented in this fourth edition of the The luxury and cosmetics financial factbook essentially
relies on three types of information:
Several standard valuation parameters and operating aggregates
Industry characteristics (in terms of growth forecasts and drivers)
An overview of 28 major actors of the industry
Even though this data is important and essential to the analysis, it must be stressed that other criteria or
parameters could also have been analyzed.
The entirety of the data utilized in this factbook is publicly

disclosed information. The Transaction Advisory Services
teams of EY who participated in drafting this document have
SOTP analyses
not had access to any confidential information. For the companies that have diversified activities (LVMH,
If the information used turns out to be incomplete or Kering, LOral), we performed sum-of-the-parts analyses to
incorrect, EY will not be held responsible for any impact this isolate the pure luxury segment and to better understand its
may have on the results or the analyses presented in this characteristics, as well as its contribution to the companies
document. performance.
It must be noted that the information provided in this study is This analysis was not possible for Swatch, Beiersdorf and
based on the latest available financial statements of each Shiseido as no accurate data was available.
company as at 31 March 2014. Market data has been
considered as of 31 March 2014, unless stated otherwise or
apart from subsequent pieces of information included in this
survey. Any modification of the analyzed groups financial
performances or any evolution of the financial markets that
occurred since 31 March 2014 could lead to partially or
completely different conclusions.
Please note that we have presented the actual 2013 figures
for the companies, which have already released their 2013
annual results as of 31 March 2014.

Methodology Page 47
Sample selection
The sample analyzed is composed of 28 listed companies from the luxury and cosmetics Please note that the sample has been adjusted in this fourth edition. Actually five
industry, of which 21 were mostly in the luxury business and 7 were in the cosmetics companies were added: Moncler and Coty have recently been listed, respectively, on
segment. the Milan Stock Exchange and on the New York Stock Exchange. Tumi, Chow Tai Fook
To select these companies we proceeded as follows: and Hengdeli were included in the sample as they are also considered as the key players
in the luxury industry.
We firstly identified pure players of the luxury sector: Brunello Cucinelli S.p.A.
(Cucinelli), Burberry Group plc (Burberry), Coach Inc. (Coach), Chow Tai Fook Jewellery
Group Ltd (Chow Tai Fook), Hengdeli Holdings Limited (Hengdeli), Herms International
S.C.A. (Herms), Hugo Boss AG (Hugo Boss), Kering SA (Kering), LVMH Moet Hennessy
Louis Vuitton S.A. (LVMH), Michael Kors Holdings Ltd (Michael Kors), Moncler S.p.A.
(Moncler), Prada S.p.A. (Prada), Polo Ralph Lauren Corp. (Ralph Lauren), Compagnie
Financire Richemont S.A. (Richemont), Salvatore Ferragamo S.p.A. (Salvatore
Ferragamo), Swatch Group AG (Swatch), Tiffany & Co. (Tiffany), Tods S.p.A. (Tods) ,
and Tumi Holdings Inc. (Tumi).
We completed this first list with other players in cosmetics: Beiersdorf AG (Beiersdorf),
Coty Inc (Coty), Este Lauder Companies Inc. (Este Lauder), LOccitane International
Methodology
S.A. (LOccitane), LOral S.A. (LOral), and Shiseido Co. Ltd (Shiseido).
We also added companies that are in direct relation with luxury companies, such as
Luxottica Group S.p.A. (Luxottica) and Safilo Group S.p.A. (Safilo).
Finally we decided to include an actor, not part of the luxury environment, but acting
as the largest cosmetics company from the emerging markets, Natura Cosmticos S.A.
(Natura), to enlarge the geographical coverage.

Page 48 Methodology
Focus on Moncler, Coty, Tumi, Chow Moncler: overview

We included Moncler in the sample as it was

listed on the Milan Stock Exchange on
16 December 2013.
Key facts: Share trading pattern (post-listing)

120
Founded in 1952, Moncler SpA designs and distributes
115
upscale clothing and accessories for men, women and
110
children.
105
It is the reference brand in its core product category, the
100
down jacket.
9 5
It has evolved from a mostly functional, wholesale-
9 0
oriented brand into a highly aspirational brand with a
85
much greater focus on retail distribution.
80
Dec- 13 J an- 14 Feb - 14 Mar- 14
IPO details:
Moncler S.p.A. FTSE MIB INDEX
Total offered shares: 76.8m, all secondary shares Source: Capital IQ
including 10.02m shares under greenshoe option. Note: Moncler IPO date = 100
Initial price range: 8.7510.2

Final offer price: 10.2 FY12AFY15E
Key financials (in m) FY12A FY13A FY14E FY15E
The IPO was oversubscribed 31 times, with value CAGR
of institutional investors orders exceeding 20b. Sales 489 581 677 783 17.0%
It gave a staggering return of 46.8% on the EBITDA 162 192 220 258 16.9%
listing date. EBITDA margin 33.0% 33.0% 32.6% 32.9% n.m
EBIT 146 173 196 229 16.3%
EBIT margin 29.8% 29.7% 29.0% 29.3% n.m
Net profit 82 96 117 144 20.5%
Capex ratio 5.4% 5.8% 4.7% 5.0% n.m
Net debt 229 178 102 26 -51.8%
Source: Capital IQ
Note: Financial figures are at 31 December. n.m = not meaningful

Methodology Page 49
Focus on Moncler, Coty, Tumi, Chow Coty: overview

We included Coty in the sample as it was

listed on the New York Stock Exchange on
13 June 2013.

120
Founded in 1904, Coty is a pure-play beauty company
that offers products in fragrances, color cosmetics 110
and skin and body care categories.
The company has a portfolio of well-known brands, 100
which include Calvin Klein, Davidoff, Marc Jacobs,

Chlo, Playboy, Balenciaga, Beyonc, Bottega Veneta, 9 0
Guess and others.

80
The company distributes its products through multiple
channels, including department stores, specialty
Methodology
70
retailers, traditional food, drug and mass retailers, J un- 2013 J ul- 2013 Sep- 2013 Oct- 2013 Dec- 2013 J an- 2014 Mar- 2014
salons and e-commerce. Coty Inc. NY SE Composite Index S& P 5 00 Index

Source: Capital IQ
IPO details: Note: Coty IPO date = 100
Total offered shares: 65.7m, all secondary shares,

including 8.6m additional shares upon exercise of FY12AFY15E
underwriters option (out of which 93% or 8.0m CAGR
were exercised in the end) Sales 3,347 3,374 3,335 3,446 1.0%
Final offer price: US$17.50 EBITDA 460 490 577 610 9.9%
EBITDA margin 13.7% 14.5% 17.3% 17.7% n.m
The stock had a muted listing and closed below offer
EBIT -137 300 386 418 n.m
price at US$17.36 on first day of trading
EBIT margin -4.1% 8.9% 11.6% 12.1% n.m
Net profit -235 122 214 237 n.m
Capex ratio 3.8% 3.6% 5.1% 4.0% n.m
Net debt 1,522 1,416 1,104 944 -14.7%
Source: Capital IQ
Note: Financial figures are at 30 June. n.m = not meaningful

Page 50 Methodology
Focus on Moncler, Coty, Tumi, Chow Tumi: overview

We included Tumi in the sample as it has

emerged as a key player in the luxury industry.
Key facts: Share trading pattern (since January 2013)

130
Founded in 1975, Tumi Holdings, Inc. designs, produces
and markets travel and business product accessories in
multiple categories. 120
Tumi distributes products globally in over 75 countries

through approximately 1,900 points of distribution. 110
The company utilizes multiple channels including retail,

wholesale and e-commerce. 100
Segment information:
9 0
J an- 13 Feb - 13 Mar- 13 Apr- 13 May- 13 J un- 13 J ul- 13 Aug- 13 Sep- 13 Oct- 13 Nov- 13 Dec- 13 J an- 14 Feb - 14 Mar- 14
The company generates 67% of its revenue from the
North American market. Tumi Holdings, Inc. NY SE Composite Index S& P 5 00 Index
Source: Capital IQ
The companys retail segment representing owned Note: 1 January 2013 = 100
stores in US and Europe contributes 50% of 2013 sales,
with balance coming from wholesale customers, which FY12AFY15E
includes specialty luggage retailers, prestige Key financials (in m) FY12A FY13A FY14E FY15E
CAGR
department stores and business-to-business channels.
Sales 289 339 394 458 16.6%
EBITDA 60 73 89 103 19.6%
EBITDA margin 20.9% 21.5% 22.6% 22.6% n.m
EBIT 52 63 78 92 21.1%
EBIT margin 18.0% 18.5% 19.7% 20.2% n.m
Net profit 27 40 48 58 29.3%
Capex ratio 5.2% 5.3% 5.2% 4.2% n.m
Net debt 6 -21 -56 -99 n.m
Source: Capital IQ
Note: Financial figures are at 31 December. n.m = not meaningful

Methodology Page 51
Focus on Moncler, Coty, Tumi, Chow Chow Tai Fook: overview

We included Chow Tai Fook in the sample as

it has emerged as a key player in the luxury
industry.
Key facts: Share trading pattern (since January 2013)

115
Founded in 1929, Chow Tai Fook is a jeweler with an
extensive retail network, with over 2077 points of sale in
more than 470 cities in Greater China, Singapore and 100
Malaysia and has a growing presence in e-commerce.

Its principal products are mass luxury jewelry and 85
high-end luxury jewelry products including gem-set

jewelry, gold products and platinum and karat gold
70
products, and watches.
Methodology
Segment information: 5 5
J an- 13 Feb - 13 Mar- 13 May- 13 J ul- 13 Aug- 13 Sep- 13 Nov- 13 Dec- 13 Feb - 14 Mar- 14
The groups vertically integrated business model gives it Chow Tai Fook J ewellery Group Ltd. Hang Seng Index
an effective and tight control over the entire operation Source: Capital IQ
chain: raw material procurement, design, production, Note: 1 January 2013 = 100
and marketing and sales.

Mainland China market constitutes approximately half of FY12AFY15E
companys revenues, with remaining half generated in CAGR
Hong Kong, Macau and other Asian markets. Sales 5,374 7,094 7,924 9,029 18.9%
EBITDA 712 939 1,088 1,262 21.0%
EBITDA margin 13.2% 13.2% 13.7% 14.0% n.m
EBIT 664 885 1,027 1,194 21.6%
EBIT margin 12.4% 12.5% 13.0% 13.2% n.m
Net profit 515 681 788 915 21.1%
Capex ratio 2.0% 1.5% 1.1% 0.9% n.m
Net debt -207 -381 -517 -560 n.m
Source: Capital IQ
Note: Financial figures are at 31 March n.m = not meaningful

Page 52 Methodology
Focus on Moncler, Coty, Tumi, Chow Hengdeli: overview

We included Hengdeli Holdings in the sample

as it has emerged as a key player in the luxury
industry.

120
Founded in 1957, Hengdeli is engaged in the retail,
distribution and wholesale of international brand 110
watches in Mainland China and Hong Kong. 100

The company has 470 retails outlets, selling watches 9 0
from more than 50 internationally renowned brands as
80
well as middle- to high-end and accessories.
The group has business relationships with the suppliers 70
of the worlds premier brands, such as Swatch Group, 6 0

LVMH Group, Richemont Group, Rolex Group and Kering
5 0
Group. J an- 13 Feb - 13 Mar- 13 Apr- 13 May- 13 J un- 13 J ul- 13 Aug- 13 Sep- 13 Oct- 13 Nov- 13 Dec- 13 J an- 14 Feb - 14 Mar- 14
Hengdeli Holdings Limited Hang Seng Index

Segment information: Source: Capital IQ
Note: 1 January 2013 = 100
Retail segment contributed approximately 60% to the
companys revenues in 2013.
FY12AFY15E
Wholesale segment, which distributes numerous Key financials (in m) FY12A FY13A FY14E FY15E
CAGR
world renowned brand watches, contributed about
35% in 2013. Sales 1,415 1,561 1,743 1,927 10.8%
EBITDA 178 125 167 188 1.9%
Remaining revenue is attributable to watch repairing and
EBITDA margin 12.6% 8.0% 9.6% 9.8% n.m
maintenance business, a packaging and decoration
EBIT 164 109 152 172 1.6%
business, a watch case manufacturing business, a hotel
EBIT margin 11.6% 7.0% 8.7% 8.9% n.m
business and a property management business.
Net profit 100 47 87 99 -0.2%
Capex ratio 3.7% 0.9% 1.4% 1.2% n.m
Net debt 153 206 -145 -140 n.m
Source: Capital IQ
Note: Financial figures are at 31 December n.m = not meaningful

Methodology Page 53
Methodology
Page 54 Glossary
Glossary
CAGR: Compound annual growth rate
Capex: Capital expenditure
DCF: Discounted cash flow
EBIT: Earnings before interest and taxes
EBITDA: Earnings before interest, taxes,

depreciation and amortization
EV: Enterprise value
FX: Foreign exchange
FY: Financial year
GDP: Gross domestic product
LTGR: Long-term growth rate
M&A: Mergers and acquisitions
M-commerce: Mobile commerce
NWC: Net working capital
RTW: Ready-to-wear
SOTP: Sum-of-the-parts
WACC: Weighted average cost of capital
YOY: Year-on-year

Contact us Page 55
Contact us
Daniel Kaplan Paul Wood Laurent Bludzien
Partner, Advisory New York Partner, Advisory Paris Partner Switzerland
NYC and Americas Coordinator EMEIA and Global Coordinator laurent.bludzien@ch.ey.com
daniel.kaplan@ey.com paul.wood@fr.ey.com +41 58 286 5677
+1 212 773 7910 +33 1 4693 7722 Hitoshi Sasaki
Consumer Products Leader Japan
sasaki-htsh@shinnihon.or.jp
+81 3 3503 1701
Andrea Guerzoni
Partner, Transaction Support Milan
EMEIA TAS Leader Steve Auyeung
andrea.guerzoni@it.ey.com Advisory China
+39 02 8066 9707 steve.auyeung@cn.ey.com
+ 86 21 2228 8888
Roberto Bonacina
Director, Lead Advisory Milan
roberto.bonacina@it.ey.com
+39 02 8066 9762
Flavie Lacault Michael Hasbani
Global Coordinator Milan Partner, Advisory Dubai
Contact us in
flavie.lacault@it.ey.com michael.hasbani@ae.ey.com
+39 02 8066 9677 +971 4 701 0100

Lifestyle
Experiential marketing
Urbanization
Operating aggregates
Cosmetics in emerging markets
Sluggish growth in Greater China
Brand management Uniqueness and exclusivity
Revival in US Production outsourcing
Cosmetics
Wholesale market
Emerging geographies
Financial parameters
Sluggish growth in Greater China
Younger male customers
Trading multiples
Infrastructure
Premium customers
Luxury
Accelerate your digital presence Focus on efficiency
Mixed and expanded offerings
Uniqueness and exclusivity Strong identity
Financial factbook
Culture convergence
Challenging growth
Brand perceptions Controlled distribution
Digital sales
Future of Chinese market Emergence of new luxury markets

Advertising expenses Positive outlook
Urban middle class

Longer term urbanization
Evolution of luxury
Globalisation
Dermocosmetics European demand stabilizing Wealth-creation opportunities
Market dynamics
Consumer behaviour
SOTP and segment analyses Evolution in attitudes
Working capital analyses
Transaction multiples Premium pricing

New market segments European demand stabilizing
Currency fluctuations
EY | Assurance | Tax | Transactions | Advisory
About EY
EY is a global leader in assurance, tax, transaction and advisory
services. The insights and quality services we deliver help build
trust and confidence in the capital markets and in economies the
world over. We develop outstanding leaders who team to deliver
on our promises to all of our stakeholders. In so doing, we play a
critical role in building a better working world for our people, for our
clients and for our communities.
EY refers to the global organization, and may refer to one or more,
of the member firms of Ernst & Young Global Limited, each of
which is a separate legal entity. Ernst & Young Global Limited, a UK
company limited by guarantee, does not provide services to clients.
For more information about our organization, please visit ey.com.
How EYs Global Consumer Products Center can help your

business
Consumer products companies are operating in a brand new
order, a challenging environment of spiraling complexity and
unprecedented change. Demand is shifting to rapid-growth
markets, costs are rising, consumer behavior and expectations
are evolving, and stakeholders are becoming more demanding.
To succeed, companies now need to be leaner and more agile,
with a relentless focus on execution. Our Global Consumer Products
Center enables our worldwide network of more than 16,000
sector-focused assurance, tax, transaction and advisory
professionals to share powerful insights and deep sector knowledge
with businesses like yours. This intelligence, combined with our
technical experience, can assist you in making more informed
strategic choices and help you execute better and faster.
2014 EYGM Limited.

All Rights Reserved.
EYG no. EN0620

Designed and production by Fairoglee Limited. (www.fairoglee.com)
ED None
In line with EYs commitment to minimize its impact on the environment, this
document has been printed on paper with a high recycled content.
This material has been prepared for general informational purposes only and is not
intended to be relied upon as accounting, tax, or other professional advice. Please refer
to your advisors for specific advice. The views of third parties set out in this publication
are not necessarily the views of the global EY organization or its member firms.
Moreover, they should be seen in the context of the time they were made.
Images: Getty Images; Fotolia.

Luxury & Cosmetics Factbook PDF

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Luxury & Cosmetics Factbook PDF

Uploaded by

Copyright:

Available Formats

Challenging growth in the luxury

and cosmetics sector

6 DCF and valuation parameters

The luxury and cosmetics financial factbook 2014

The luxury and cosmetics financial factbook 2014

Statistics and key facts

The luxury and cosmetics financial factbook 2014

EY index STOX X S& P

The luxury and cosmetics financial factbook 2014

Positive future growth will be driven by

DCF and valuation parameters

DCF and valuation parameters

D SOTP and segment analyses

A Financial parameters Luxury companies continue to reflect high-potential growth

WACC and LTGR by company

9 .5 Hugo Burb erry Brunello

The luxury and cosmetics financial factbook 2014

A Financial parameters The cosmetics sample is characterized by a smaller number of

DCF and valuation

WACC and long-term growth rate (LTGR) by company

The luxury and cosmetics financial factbook 2014

A Financial parameters EY luxury and cosmetics sample:

WACC (in %) Beta Gearing (in %) LTGR (in %)

Luxottica 7.6 % Hugo Boss 0.5 9 Beiersdorf ( 8.7) Safilo 2.0%

Prada 8.7% Tumi ( 1.9 ) Prada 2.7%

L' Occitane 8.7% Prada 0.83 L' Or al ( 1.8) Tod' s 2.9 %

Average 8.9 % Kering 0.9 6 Hugo Boss 1.1 L' Or al 3.0%

LVMH 9 .0% LVMH 1.01 Salvatore Ferragamo 1.1 R ichemont 3.1%

Shiseido 15 .2 Herms 3.6 %

WACC 8.9% Beta Gearing LTGR

The luxury and cosmetics financial factbook 2014

Expected growth will mainly be driven by:

DCF and valuation

Sales CAGR, FY12AFY15E luxury companies

The luxury and cosmetics financial factbook 2014

Sales CAGR, FY12AFY15E cosmetic companies

Source: Data based on consensus of several brokers reports for

The luxury and cosmetics financial factbook 2014

DCF and valuation

Average EBITDA margin, FY12FY15E luxury companies

The luxury and cosmetics financial factbook 2014

Average EBITDA margin, FY12AFY15E cosmetics companies

Source: Data based on consensus of several brokers reports for

The luxury and cosmetics financial factbook 2014

DCF and valuation

The luxury and cosmetics financial factbook 2014

Average capex ratio, FY12AFY15E cosmetics companies

Source: Data based on consensus of several brokers reports for

The luxury and cosmetics financial factbook 2014

B Operating aggregates EY luxury and cosmetics sample:

DCF and valuation

The luxury and cosmetics financial factbook 2014

C Advertising expenses and Advertising remains a key driver of the industry

Selected companies advertising expenses as a % of sales, FY13A/E

The luxury and cosmetics financial factbook 2014

DCF and valuation

The luxury and cosmetics financial factbook 2014

The luxury and cosmetics financial factbook 2014

D SOTP and segment analyses LVMH: sum of the parts (SOTP)

LVMH SOTP analyses imply a total enterprise valuation of 85.3b in FY14E.

DCF and valuation

Fashion Perf umes Watches Wines Selective Eliminations Herms Total

Luxury products Luxury products Luxury products