Global luxury goods market growing at 9% per year

Global luxury goods market growing at 9% per year despite uncertain signals; according to Bain & Company's 6th annual 'luxury goods worldwide market'

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

New York, NY - November 14, 2007 - 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 Euro 13Bn to Euro 159Bn. Europe continues to be the 'first market' of luxury, contributing Euro 5,4 (or 42%) of the Euro 13Bn growth in sales, which represented a 10% increase over 2005. While representing only 11% of Euro 159Bn 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.

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 growthJapan, which represents 13% of the Euro 159Bn 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 Euro' 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 The luxury goods segment which fared best in Japan, up 3% year-over-year

Aspirational - characterized by being recognizable and/or distinctive, and represented by such brands as Gucci and Louis Vuitton Represented largest rate of luxury goods growth in U.S., up 11% in 2006 over 2005

Accessible - characterized by affordability, status and membership, and represented by such brands as Coach and Burberry Delivered a luxury goods growth rate of 22% in Asia-Pacific (excluding Japan) - nearly 2.5-times greater than the global average for 'accessible luxury' sales growth Sales growth in Asia-Pacific driven by high degree of entry level access to luxury goods

"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."