By
Reuters
Published
Oct 18, 2010
Reading time
3 minutes
Download
Download the article
Print
Text size

Luxury sales growth to slow in 2011, stocks fall

By
Reuters
Published
Oct 18, 2010


Haute S/S 2011
MILAN/PARIS, Oct 18 (Reuters) - U.S. consultancy Bain & Co predicts growth in the luxury sector will slow next year to 3-5 percent after a 10 percent rebound in 2010, sending down the shares of several major European luxury stocks.

Bain, which worked on the report together with luxury trade body Altagamma, on Monday said it expected growth in the luxury sector to run out of steam as the basis for comparison became higher and currency fluctuations could hamper tourist flows.

The luxury goods industry, which suffered its worst slump in 2009 with an 8 percent drop in global sales, has been catching up lost ground up at a faster pace than expected.

Bain predicted back in April that global luxury sales would grow only 4 percent in 2010.

But the U.S. rebound, coupled with luxury brands expanding at break-neck speed in China and the weak euro attracting tourist shoppers in Europe, means global sales are now expected to grow 10 percent to 168 billion euros ($233.6 billion) this year.

China remains the fastest-growing luxury market with sales expected to rise 30 percent this year, while crisis-hit Japan will start to recover only next year, the study showed.

Sales in Europe, whose luxury brands account for around 75 percent of the global market, are seen up 6 percent this year, fuelled by shoppers from emerging markets.

The United States, where sales fell 15 percent in 2009 hit by discounts at department stores, are set to be 7 percent higher this year, or 12 percent at constant foreign exchange rates.

"Global consumption in 2011 should be significantly close to the record levels of 2007," Altagamma's secretary general Armando Branchini said.

Global sales should rise to 173-176 billion euros ($246 billion) in 2011, up from 170 billion euros in 2007.

Leather bags, shoes, jewellery and watches are expected to rise more than 8 percent next year, trailed by clothing, perfumes, cosmetics and tablewear.

As always, women remain the biggest luxury buyers, making up 61 percent of the total luxury consumer base compared with 39 percent for men, the report said.

Wholesale luxury revenue is estimated to grow 6 percent in 2010 while revenue from directly operated stores should be up 20 percent.

But if competition remains tough, luxury goods groups' margins are expected to improve next year, helped by higher prices and a cost base slimmed down by the slump.

"In the first half of this year we talked about a light at the end of the tunnel," Santo Versace, chairman of Italian luxury goods association Altagamma which contributed to the study, said in a statement.

"On the basis of the preliminary 2010 figures, we can confirm that positive trend," said Versace, who is also chairman of Italian fashion house Versace.

Players with global reach, strong brand heritage and an efficient directly operated retail network will take most advantage of the rebound, the report said.

LVMH (LVMH.PA), the world's biggest luxury group, beat third-quarter forecasts this month while Burberry (BRBY.L) said it expected its full-year profit to be at the top end of expectations, confirming the sector's strong recovery.

After a months-long rally, several major European luxury stocks fell on Monday, partly on the back of the report and profit-taking, analysts said.

LVMH, which gained 43 percent this year, was down 1 percent, Hermes which has risen 93 percent since Jan.1, was down 1.5 percent and PPR (PRTP.PA) was down nearly 3 percent by 1137 GMT.

"The sector has risen a lot in recent months so I think there is also (on top of the Bain report) a bit of profit-taking as the basis for comparison (for growth) going forward will become more demanding," one Paris-based analyst said.

The luxury yacht industry will continue to fall at double-digit rates this year to an estimated 6.4 billion euros, Bain said, with smaller boats reacting better to the unfavourable sales environment.

(By Antonella Ciancio and Astrid Wendlandt. Editing by Mike Nesbit and David Cowell) ($1=.7153 euros)

© Thomson Reuters 2024 All rights reserved.