Oct 21, 2008
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Outlook seen challenging for luxury goods in 2009

Oct 21, 2008

By Marie-Louise Gumuchian

MILAN (Reuters) - The luxury goods market is expected to see slowing growth this year and a possible downturn in 2009 as the global crisis and weaker consumer confidence hit the sector, experts said on Tuesday.

Analysts are expecting cracks to appear in the global luxury market, starting with the Christmas period when such companies make a large part of their annual revenues.

Italian jeweler Bulgari was one of the first groups in Europe to warn last month that it expected Christmas sales to be poorer this year than last. According to a study by Bain & Co. presented at the Altagamma luxury goods conference, a strong slowdown is expected for the last quarter for the personal luxury goods market, which includes shoes, jewelry and fashion.

The sector had turnover of 170 billion euros ($225.2 billion) last year and is estimated to reach 175 billion euros in 2008, up 3 percent. This follows a 6.5 percent growth last year.

"The real problem will be Christmas," Claudia D'Arpizio, a partner at Bain & Co., told the conference.

"But I do not think that it will have a devastating effect because there will also be a positive impact of the appreciation of the U.S. dollar in the last quarter."

The fourth quarter is expected to a register a 1 percent fall in business, compared to growth in the previous quarters.

D'Arpizio said the sector could range between a 2 percent fall or 2 percent growth in 2009 at current exchange rates. At constant rates, it could fall 3-7 percent.

It would be weighed down by European, U.S. and Japanese markets but helped by emerging areas -- Russia, India, Brazil Asia Pacific, especially China -- and a dollar and yen recovery.


Altagamma, an Italian fashion industry association, said its member companies would see "good growth" in 2008 from last year. It said fashion companies would see 5 percent growth, while jewelers would enjoy a 3 percent rise.

"Growth this year will be more limited compared to the previous four years, but it will still be growth," said Armando Branchini, Altagamma's secretary general.

By sector, D'Arpizio said a global slowdown was expected in watch and jewelry sales for the last quarter while shoes had been a record category for the luxury sector.

"Shoes are becoming the most important accessory in a woman's look," she said, quoting women as saying, "'We do not compromise on shoes.'"

Yacht sales, especially those costing more than $15 million, would not be hurt by the crisis, she said. Designer furniture is expected to be hit by the real estate crisis.

Michele Norsa, chief executive of luxury goods maker Salvatore Ferragamo, said he was uncertain about performance in the fourth quarter.

(Additional reporting by Cristina Carlevaro; Editing by David Cowell)

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