Global Luxury Goods Market Growing at 9% Per Year Despite Uncertain Signals; According to Bain & Company's 6th Annual 'Luxury Goods Worldwide Market' Study

Business Wire, Nov 14, 2007

Europe Remains 'First Market' for Luxury, While Growth in Asia Driven by 'Accessible' Luxury

NEW YORK -- Bain & Company today released the results of its 6th annual 'Luxury Goods Worldwide Market' study and finds that sales of global luxury goods grew by 9% in 2006, up EU13Bn to EU159Bn. Europe continues to be the 'first market' of luxury, contributing EU5,4 (or 42%) of the EU13Bn growth in sales, which represented a 10% increase over 2005. While representing only 11% of EU159Bn in 2006 sales, the luxury goods market in Asia-Pacific (excluding Japan) grew by 18% over 2005 - a growth rate double that of the global average. China led the way in Asia with 30% year-over-year growth, followed by "young" India's 25% growth - and Taiwan, Singapore and Korea all showed strong growth and fundamentals.

The annual study is commissioned by Altagamma, the Italian association of Italian luxury goods companies (Editor's Note: Refer to the boilerplates at the end of this release for more information on Bain, Altagamma and the Luxury Goods Worldwide Market study methodology).

Key Findings

* Total luxury goods market 2006 sales growth of 9% over 2005 equaled the percentage growth of 2005 sales over 2004 - which nearly doubled the 5% growth of 2004 over 2003 sales

* Growth was spread across all major brands. Eighty-five percent of companies analyzed reported positive year-over-year sales growth - the highest percentage recorded since the inception of the study in 1999

* Accessories (handbags, shoes, etc.) showed the strongest product category growth with a 15% increase over 2005 sales growth, followed by apparel and hard luxury both with 10% year-over-year growth

* 'Menswear' over-performed the market and continues to gain a bigger share of the luxury goods market. Sales in the U.S. and Europe generated 95% of the menswear growth

* The 9% year-over-year growth was less than the 11% growth reported in the income statements by the 200 luxury goods companies in Bain's 'Luxury Goods Worldwide Market Observatory' database. A key reason for the discrepancy is emerging retail channel leadership, growing 13% over 2005, as compared with the 7% growth achieved in wholesale market growth

* Japan, which represents 13% of the EU159Bn luxury goods market, grew at only 1% over 2005 primarily as a result of a weaker currency and stagnating incomes in the second half of 2006

"The luxury goods market outlook looks to remain strong through 2007," said Claudia D'Arpizio, a Bain & Company partner and luxury goods expert based in Rome, and study author. "Bain estimates overall luxury goods sales growth in 2007 to be in the 10-12% range over last year's performance, excluding any 'Super EU' currency impact and potential fallout from the sub-prime mortgage crisis in the U.S."

The Three A's of Luxury

The study reveals luxury goods performance in terms of three segments:

* Absolute - characterized by elitism, heritage and uniqueness, and represented by such brands as Harry Winston and Hermes

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* Aspirational - characterized by being recognizable and/or distinctive, and represented by such brands as Gucci and Louis Vuitton

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* Accessible - characterized by affordability, status and membership, and represented by such brands as Coach and Burberry

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"While times are good, luxury goods companies can't afford to coast along," added D'Arpizio. "Consumer winds can blow in a different direction at a moment's notice, so companies must continue to capitalize on existing market opportunities and seek out new markets to exploit."

To receive a copy of the 'Luxury Goods Worldwide Market' study or to schedule an interview with Claudia D'Arpizio, please contact: Cheryl Krauss, e-mail: cheryl.krauss@bain.com or ph.: 646-562-7863, or Frank Pinto, e-mail: frank.pinto@bain.com or ph: 917-309-1065.

About Bain & Company, Inc.

Bain & Company, a leading global business consulting firm, serves clients on issues of strategy, operations, technology, organization and mergers and acquisitions. The firm was founded in 1973 on the principle that Bain consultants must measure their success by their clients' financial results. Bain clients have outperformed the stock market 4 to 1. With 37 offices in 24 countries, Bain has worked with over 3,600 major multinational, private equity and other corporations across every economic sector. For more information visit: www.bain.com.

About the Bain 'Luxury Goods Worldwide Market' Study

Bain & Company, in cooperation with Altagamma - the flagship trade association for the Italian luxury goods industry - has analyzed the market and financial performance of 200 of the world's leading luxury goods companies and brands. The database of companies, known as the 'Luxury Goods Worldwide Market Observatory', has become a leading and much studied source for the international luxury goods industry. Bain publishes its annual findings in its 'Luxury Goods Worldwide Market' study, which was first published in 2000.