Contact: Cheryl Krauss
Bain & Company
Telephone: +1 646 562 7863
cheryl.krauss@bain.com

LUXURY GOODS SALES TO DROP AS MUCH AS 20% IN FIRST TWO QUARTERS OF 2009 ACCORDING TO LATEST BAIN & COMPANY LUXURY FORECAST

Brands Wrestle with Shrinking Personal Wealth, Retailer Price Cutting and Slowing Growth in Emerging Markets

New York, NY - April 20, 2009 - Bain & Company today released a semi-annual update to its 'Luxury Goods Worldwide Market' study (7th edition) in response to the sharp deterioration of the global economy since October 2008. The luxury sector faces between a 15% and 20% decline in sales revenues during the first two quarters in 2009 (at constant exchange rates), shrinking to 153 billion euro from its 2008 level of 170 billion euro. Bain estimates that the worldwide luxury market will begin stabilizing in the second half of the year, resulting in a net decline of 10% for 2009 overall.

"This year's declines are hitting both the top and bottom lines of luxury goods companies," said the study's author Claudia D'Arpizio, a Bain partner and luxury goods expert based in Milan. "Luxury shoppers are spending less, traveling less and feeling less confident. Luxury goods producers are also feeling the additional squeeze of intense pricing pressure and markdowns from retailers and higher-end department stores."

Bain estimates a 15% decline in the Americas and 10% declines in Europe and Japan. These major luxury markets account for over 80% of worldwide sales. Smaller luxury markets show more promise, with projected growth of 7% in China and 2% in the Middle East, but these gains will provide only a small offset against steep declines in major markets.

Among the major luxury product categories, apparel will be hit the hardest, declining by 15%. Jewelry and watches will decline by 12%, while leather goods, shoes and accessories will decline by 10%. Luxury cosmetics and fragrances will be the most resilient categories in 2009 with sales of 22.4 billion euro for cosmetics and 18.4 billion euro for fragrances, both comparable to 2008 levels.

The differences between categories reflect a trend among luxury shoppers to switch to lower price point items while still remaining loyal to top-of-mind brands. "One of the biggest changes we've seen in consumers is that 'price' and 'luxury' are no longer synonymous," observes D'Arpizio. The study explores further deep changes in consumer behavior and attitude as luxury shoppers adjust to a global recessionary psychology:

• Reaching Lower. Consumers who are newly entering the luxury market, called 'accessible luxury' consumers, are purchasing items at the lower end of brands' product lines
• Seeking Intrinsic Value. The most affluent, or 'absolute,' luxury shoppers have begun to focus more on the intrinsic quality of materials and the durability of luxury items instead of on fashion content
• Buying the Experience. Experiences are in. Consumers who value the dream offered by luxury brands, called 'aspirational' consumers, are increasingly motivated by service and in-store events as much as by merchandise
• Spending Discreetly. Ostentation is out. Consumers are gravitating to more discreet products, preferring understatement in what they buy and how they shop in luxury stores
• Fleeing to Value. Many shoppers across all luxury segments now wait for deeper discounts at the end of the season, or seek out discounts at department stores and outlets

Though luxury companies will face increased pressures in 2009, Ms. D'Arpizio cautions them to resist overreacting to anticipated declines. Bain's analysis shows a long-term trend of continued growth in the number of luxury customers with the new segments emerging, including:

• newly affluent consumers in emerging markets, especially working women,
• men who are more willing to pamper themselves,
• younger generations with new tastes and styles,
• the number of high net worth individuals. According to Bain's '2009 China Private Wealth Study,' the number of Chinese high net worth individuals (those with more than 10 million RMB, or approximately $1.5 million) is estimated to grow by 6% in 2009.

Concludes D'Arpizio, "Changing values and consumer habits are creating tremendous opportunities for brands to win new customers and strengthen their relationships with existing ones. While today's economic turbulence is requiring a hard look at costs, luxury goods producers would be wise to also keep an eye on the future."

To receive a copy of the 'Luxury Goods Worldwide Market' study (7th edition) update 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.

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About the Bain Annual '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 over 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.

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 39 offices in 26 countries, Bain has worked with over 4,150 major multinational, private equity and other corporations across every economic sector. For more information visit: www.bain.com.