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By
Reuters
Published
Apr 18, 2010
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Bain sees 2010 global luxury goods sales up 4 percent

By
Reuters
Published
Apr 18, 2010

By Astrid Wendlandt, European Luxury Goods Correspondent

PARIS, April 16 (Reuters) - Wealthy spenders are back in the shops and should help lift global luxury sales by more than 4 percent this year as the industry recovers from its worst slump ever, U.S. consultancy Bain & Co said in a study on Friday 16 April.



The industry is slowly turning its back on the black year of 2009, during which luxury goods sales fell 8 percent, as rising equity markets are boosting the confidence of well-heeled buyers and prompting them to open their wallets again.

Bain said it expects global luxury sales to rise between 5 percent and 10 percent during the first half of the year compared with the same period last year.

The study comes after the world's biggest luxury group, LVMH (LVMH.PA), on Tuesday 13 April posted a 13 percent rise in comparable first-quarter sales, twice what investors expected. The company said retailers were rebuilding their stocks and demand was picking up.

However, the maker of Louis Vuitton 10,000-euro handbags and Hennessy cognac said at its annual general meeting Thursday 15 April that it was too early to predict if the strong growth seen during the first months of the year would last throughout 2010.

Luxury goods stocks have enjoyed a strong rally in the past year on the back of recovery expectations. Some, such as Richemont (CFR.VX) and Swatch (UHR.VX), have nearly doubled, while LVMH has gained 71 percent.

"Luxury is growing again," the Zurich-based Julius Baer Luxury Brands Fund said this week in a note, adding that consumers suffered from "frugal fatigue."

The fund said valuations were not stretched, in spite of the rally, as luxury stocks usually outperformed in rising equity markets.

Bain predicted strong brands would benefit most from the upturn and weak brands suffering from cash problems would have to look for buyers or risk bankruptcy.

"This polarization creates fertile conditions for market concentration. As mega-brands capture more market share, 2010 is likely to be a year when the search for capital triggers M&A and IPOs, and continued challenging conditions for lagging brands create ongoing risk for failures and bankruptcies," Bain said.

The U.S. consultancy said it expects apparel, watch and jewellery sales to rise 4 percent this year, and revenue from accessories, shoes and other leather goods to be up 5 percent.

China will remain the rising star with an expected 15 percent growth in its luxury sales this year, while Asia, excluding Japan, should see luxury sales rise 10 percent, Bain said.

Luxury goods sales should rise 4 percent in America and 3 percent in Europe, while in Japan they should drop 3 percent, it said. (Reporting by Astrid Wendlandt; Editing by John Wallace)

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