This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent

Worldwide Luxury Markets Monitor

Spring 2013 Update

Milan, 16th May 2013

2

'95

77

'96

85

'97

92

'98

96

'99

108

'00

128

'01

133

'02

133

'03

128

'04

136

'05

147

'06

159

'07

170

'08

167

'09

153

'10

173

'11

192

'12E

212

11%11%11%11%

10%10%10%10%

WORLDWIDE PERSONAL LUXURY GOODS MARKET TREND (1995-2012E|€B)

13%13%13%13%

Sept 11 SARS Subprime & financial crisis

$/€

Socio-Economic Turbulence

Japan earthquake

2012 was the third year in a row of double-digit growth for personal luxury goods, now over the 200€B ceiling

3

2011

192

Q1

6,2

Q2

6,2

Q3

3,5

Q4

3,8

2012E

212

7%14% 14% 7% 7%14% 14% 7%QoQ

growth

QoQ

growth

PERSONAL LUXURY GOODS MARKET BY QUARTER (€B)

+10%+10%+10%+10%

HOLIDAY SEASON TRENDS

The 2012 holiday season fell in line with Q3 2012

• “Black Friday effect” impacted the entire season

-Increasing weight of holiday promotions and deals

-Extended store hours

• Positive but not outstanding holiday season, given lower than expected traffic both in European and US markets

• Shift from ordinary gifting to self-gifting attitude

• Soaring online sales, driven by mobile commerce

-Increasing role of deals and discounts on shipping fees

4

YoY ‘11 vs ‘10

+9%+9%+9%+9%

+2%+2%+2%+2%

+25%+25%+25%+25%

+11%+11%+11%+11%

+13%+13%+13%+13%

++++9999%%%% +13%

+4%

+26%

+13%

+11%

@K

YoY ‘12E vs ‘11

+13%+13%+13%+13%

+5%+5%+5%+5%

+8%+8%+8%+8%

+18%+18%+18%+18%

+10%+10%+10%+10%

+8%+8%+8%+8%

+5%

+3%

+1%

+10%

+5%

+6%

@K

+8%

WORLDWIDE LUXURY GOODS MARKET BY AREA (2011-2012E|€B)

Asia remained the major growth engine in 2012

AmericasAmericasAmericasAmericas

EuropeEuropeEuropeEurope

JapanJapanJapanJapan

AsiaAsiaAsiaAsia----PacificPacificPacificPacific

Rest of WorldRest of WorldRest of WorldRest of World

5

AccessoriesAccessoriesAccessoriesAccessories

Hard LuxuryHard LuxuryHard LuxuryHard Luxury

ApparelApparelApparelApparel

Perfume Perfume Perfume Perfume & & & & CosmeticsCosmeticsCosmeticsCosmetics

Art de la tableArt de la tableArt de la tableArt de la table

+14%+14%+14%+14%

YoY ‘11 vs ‘10

+8%+8%+8%+8%

+4%+4%+4%+4%

+21%+21%+21%+21%

+11%+11%+11%+11%

YoY ‘12E vs ‘11

±±±±0%0%0%0%

+15%+15%+15%+15%

+10%+10%+10%+10%

+5%+5%+5%+5%

+12%+12%+12%+12%

+10%+10%+10%+10%

±±±±0%0%0%0%

WORLDWIDE LUXURY GOODS MARKET BY CATEGORY (2011-2012E|€B)

Accessories and hard luxury outperformed the market in 2012, while apparel accelerated its growth

6

2012growth @

constant

5%

2012Currency

effect

5%

2012growth @

current

10%

Q1 2013growth @

constant

3%

Q1 2013Currency

effect

-1-2%

Q1 2013growth @

current

1-2%

8% -3%EUR/USD

8% -16%EUR/JPY

7% -5%EUR/GBP

2% -2%EUR/CHF

11% -2%EUR/CNY

8% -3%EUR/USD

8% -16%EUR/JPY

7% -5%EUR/GBP

2% -2%EUR/CHF

11% -2%EUR/CNY

(USD appreciation)

(JPY appreciation)

(GBP appreciation)

(CHF appreciation)

(CNY appreciation)

WORLDWIDE PERSONAL LUXURY GOODS MARKET TREND@ CONSTANT AND CURRENT EXCHANGE RATES (2012E-Q1 2013F)

(USD devaluation)

(JPY devaluation)

(GBP devaluation)

(CHF devaluation)

(CNY devaluation)

+

+

+

+

+

EUR/USDEUR/USDEUR/USDEUR/USDEUR/JPYEUR/JPYEUR/JPYEUR/JPYEUR/GBPEUR/GBPEUR/GBPEUR/GBPEUR/CHFEUR/CHFEUR/CHFEUR/CHFEUR/CNYEUR/CNYEUR/CNYEUR/CNY

Q1 2013 growth has cooled, with unfavorable impact from exchange rate fluctuations

7

• Tourist flows slowing down, especially from Japan

• Chinese consumers reducing average baskets due to narrowing price gaps

• Intra-European tourism from Russia

DistressedDistressedDistressedDistressedEuropeansEuropeansEuropeansEuropeans

Back to Back to Back to Back to basicsbasicsbasicsbasics

• Clean-up of independent wholesale distribution networks

• Cautious retail plans: new formats in key locations and pop-up stores

Omni Omni Omni Omni channelchannelchannelchannel

• 360° connection ofphysical and digital stores: cross-platform service & experience

• Department storessynchronizing tech across physical and digital

Younger Younger Younger Younger curiositycuriositycuriositycuriosity

• Younger generation is coming and looking for fashion at lower price

• Accessories key category for recognizability

EUROPE2013 KEY TRENDS

US2013 KEY TRENDS

Confidence Confidence Confidence Confidence boostboostboostboost

Tourism Tourism Tourism Tourism FatigueFatigueFatigueFatigue

The U.S. is rediscovering luxury, while Europe is struggling

• Local consumption has not recovered yet, especially in Mediterranean countries

• Price increases further threatening domestic consumption

• Premium brands taking share from luxury

• High consumer confidencepushing domestic consumption

• US key cities continue to drivetourist traffic

• Expansion in 2nd tier locations

8

2,7

Brazil

SOUTH AMERICA LUXURY GOODS MARKET BY COUNTRY (2012E|€B)

1,0

Mexico

0,3

Argentina

South South South South AmericaAmericaAmericaAmerica

4,5€B

BrazilBrazilBrazilBrazil• Brazil getting ready for the upcoming World

Cup and Olympic Games, thus increasingly attracting international brand interest

• Luxury real estate gradually improving outside Sao Paulo

• Import tariffs and duties still major obstacle

• DINKs a fast-growing luxury target

MexicoMexicoMexicoMexico• Growth of traditional luxury categories

• “Youngsters” fueling growth

ArgentinaArgentinaArgentinaArgentina• A luxury exodus that started in 2012 will

continue, with international brands leaving the country:

- Government trade restrictions and import tariff

- Collapse of local currency and control over circulation and exchange of foreign currency

+12%2013 growth @K

2013 KEY TRENDS

South America is growing steadily, but there’s a performance dichotomy across countries

9

2010

18

2011

18

2012E

20

2013F

21

-30-40%

+5

+10%

Japanese monetary policy is boosting domestic luxury consumption but discouraging travel

• Strong yen devaluation (16% vs.

2012) pushing local consumption

-Positive impact of Abenomics to reduce 15 years of deflation and stagnation

-Advance purchases to bypass an expected consumption tax in 2014

• Negative outbound flows of tourists

-Strong reduction of foreign consumption, especially in Europe and Hawaii

• Luxury brands still struggling to capture changing consumer

behaviour, especially of younger generations

-Increasing interest in customized and personalized products

-Digital and social media now rule the game for luxury companies in Japan

JAPAN LUXURY GOODS MARKET

Trend of domestic vs foreign consumption for Japanese consumers (2013F)

DomesticDomesticDomesticDomestic

ForeignForeignForeignForeign

+2% +8%

Japan Personal Luxury Goods Market trend (2010-2013F, €B)

+4%+1%

@K

+5%

2013 KEY TRENDS

10

The China question: maturing market or still booming?

2010

9,6

2011

12,5

2012E

15,0

2013F

16,0

China Personal Luxury Goods Market trend (2010-2013F, €B)

China Personal Luxury Goods Market by segment trend (2013F)

• High single-digit expected growth for domestic

consumption, confirming 2012 trend

• E-commerce growing at double digits

-New generations entering luxury arena thru e-tailing and digital platforms

• Polarization of consumers’ attitudes:

-High-end and sophisticated luxury is booming

-Fatigue of logo-businesses: aspirational consumers shifting to more accessible luxury/premiumbrands, benefitting from rise of new middle class

• Gifting impacted by the new Chinese

government anti-corruption campaign

-Gift-giving crackdown hitting luxury sales, especially for watches; shift to more “personal consumption” in women’s apparel

-Social networks (microbloggers) building negative buzz around luxury ostentation

• Chinese changing travel habits: Australia is a rising destination

@RMB

+30% +20%

+30%+8%

+7%@k

+9%

CHINA LUXURY GOODS MARKET 2013 KEY TRENDS

11

15,0South Korea

8,3

China

Taiwan4,5

Singapore

2,5

Thailand0,9

Macau0,9

Hong Kong

7,01,0

India

Malaysia

0,9

Philippines

0,3

0,3Vietnam

0,6Indonesia

ASIA PACIFIC LUXURY GOODS MARKET BY COUNTRY (2012E|€B)

Greater ChinaGreater ChinaGreater ChinaGreater China• Hong Kong and Macau benefiting from

shift in tourist flows previously targeting Europe

• Taiwan increasingly challenging (sharp slowdown in new openings)

South KoreaSouth KoreaSouth KoreaSouth Korea• Political tension lowering consumer

confidence worsening a slowdown in luxury consumption that began late 2012

South East AsiaSouth East AsiaSouth East AsiaSouth East Asia• Singapore still a major regional hub (#8

luxury destination worldwide)

• 2nd tier markets increasingly relevant both for domestic spending and tourist flows, especially during Chinese Golden Week

• Malaysian and Indonesian consumers becoming familiar with luxury; players planning more direct and importantpresence

Greater ChinaGreater ChinaGreater ChinaGreater China27,3€B

+6%2013 growth @K

SEASEASEASEA5,5B

South East Asia is driving Asian growth; polarized performance in Greater China and challenges in Korea

+20%2013 growth @K

2013 KEY TRENDS

12

Middle East is growing at a steady pace, with

Dubai continuing as the center of gravity

MIDDLE EAST LUXURY GOODS MARKET BY COUNTRY (2012E|€B)

UAE

2,7

1,7

Saudi Arabia0,5

Qatar0,4

Bahrain

0,5Kuwait

Middle EastMiddle EastMiddle EastMiddle East6,3B

+5%2013 growth @K

• Growing region, characterized by a strong

tradition in local luxury and an appetite of both younger generations and mature consumers

for global luxury brands

• Local consumption and intra-region touristic flows are key market drivers

• Strong historic relevance of hard luxury and

perfumes/cosmetics; apparel and accessories catching up

• Important growth in 2013, due to both organic

growth and new stores and malls

United Arab EmiratesUnited Arab EmiratesUnited Arab EmiratesUnited Arab Emirates• Dubai is the heart of the region

-The only city in the area attracting foreign luxury

consumers (mainly Russians, Indians, Africans)

-The city alone commands ~30% of the luxury market of the region, around ~60% of UAE

-Dubai Mall accounts for around 50% of the Dubai market

2013 KEY TRENDS

13

For 2013, the market outlook is positive despite economic uncertainty

EuropeEuropeEuropeEurope

AmericasAmericasAmericasAmericas

JapanJapanJapanJapanAsia PacificAsia PacificAsia PacificAsia Pacificex Mainland Chinaex Mainland Chinaex Mainland Chinaex Mainland China

Mainland ChinaMainland ChinaMainland ChinaMainland China

ROWROWROWROW

2013 EXPECTED GROWTH RATES BY REGION

+0-2%

+5-7%

+4-6%

+7-9%

+6-8%

+4-6%

+4-5%@K

14

Where?Where?Where?Where?

What?What?What?What?

Who?Who?Who?Who?

Key drivers of luxury goods market growth in 2013

• Slowdown of touristic flows undermining European growth

• Robust organic growth in US; South America maintaining

momentum despite Argentine exodus

• APAC mixed performance: troubles in Korea vs. high single-

digit growth in China and brilliant performance in SEA

• Japanese purchasing more domestically than when travelling

• Absolute segment and high-end products (no logo, precious

materials, etc.) leading the way

• Leather goods continue their run over other categories

• Watches sharply decelerating due to de-stocking

• Cosmetics slowing down despite growth in emerging markets

• Tourists changing consumption habits: new rising destinations

and more savvy shopping

• HENRYs (High Earnings Not Rich Yet) are the fuel of maturemarkets: lower spending threshold, but they outnumber ultra-

affluent households by 10X

• Rise of the middle class in emerging countries is polarizing the competitive arena: are they a new ″baby boomer″ generation?

15

2010

173

2011E

192

2012E

212

2013F

220-222

2015F

240-250

+11%+11%+11%+11%

+10%+10%+10%+10%

+4+4+4+4----5%5%5%5%

+5+5+5+5----6%6%6%6%CAGRCAGRCAGRCAGR

WORLDWIDE PERSONAL LUXURY GOODS MARKET EVOLUTION (2010-2015F|€B)

Luxury fundamentals will remain strong in the medium term

@K@K

KEY DRIVERS OF FUTURE GROWTH

• Asia Pacific, led by Greater

China and South-East Asia

• Touristic flows to typical luxury

destinations (Europe, US) and to

emerging eldorados (Dubai, South-East Asia, Australia)

• Accessories, led by bags

• Digital and omni-channel players

• New generations: Y and Z

• High-spending consumer segments: DINKs, HENRYs,

working women, men

16

Exclusivity & status Sense of belonging

The key macro-trend impacting the luxury market in coming years will be generational shift

55+

Retired/retiring

Mainly men

Baby BoomersBaby BoomersBaby BoomersBaby Boomers35-55

At the top of the career

Men & women

Generation XGeneration XGeneration XGeneration X20-35

First earning money/2nd

generations

Only children

Generation YGeneration YGeneration YGeneration Y0-20

Spending parents’ money

Demanding

Generation ZGeneration ZGeneration ZGeneration Z

Scarcity 24/7 availability (at click)

Bricks & Mortar OmnichannelMultichannel

Detached selling ceremony Tailored entertainment

Uniqueness

Personal relationship 360° experience“Customer relationship”

17

1995

100

2012E

275

2025F

500+

How to succeed in next the 10-15 years? Get prepared for Luxury 2.0

LUXURY GOODS MARKET TREND INDEXED (1995=100)

People excellencePeople excellencePeople excellencePeople excellence- Talent management

- Front line engagement

- Customer-centricity

Flawless retail managementFlawless retail managementFlawless retail managementFlawless retail management- Continuous network optimization

- Hospitality culture

- Assortment chain

Superior customer experienceSuperior customer experienceSuperior customer experienceSuperior customer experience- Promoter system around the brand

- Omnichannel strategy

- Innovation marketing

Luxury 2.0 imperativesLuxury 2.0 imperativesLuxury 2.0 imperativesLuxury 2.0 imperatives

18

Claudia D’Arpizio, PartnerBain Luxury Goods Practice

Claudia D’Arpizio is a Partner at Bain & Company. She is a leading member of the firm’s Global Consumer Products and Retail Practices, and Leader of Bain’s Global Luxury Goods and Fashion Practice.

For 19 years, Claudia has advised multinational clients, mainly in fashion and luxury goods. She has extensively worked on issues relating to business unit strategy, sales and marketing, product and service adjacencies, channel strategy, new product development, innovation, acquisitions and divestitures, performance improvement and organizational changes.

Claudia is the lead author of the Bain’s Yearly Luxury Study, developed since 1999 in cooperation with Altagamma, the trade association of the Italian luxury brands. This study, based on the analysis of an extensive panel of worldwide luxury brands, is periodically updated and has become one of the most valued and cited sources of market information in the luxury industry.

Claudia is a globally recognized expert in luxury and in 2009 was named by the Consulting Magazine one of the “Top 25 Consultants in the World”.

Claudia is frequent speaker and writer on luxury goods strategy and she is extensively quoted in Italian and international media: Il sole 24 ore, La Repubblica, Il Corriere della Sera, The Wall Street Journal, US, Europe and Asia editions, Financial Times, New York Times, The Economist, Newsweek, Reuters, Bloomberg, Associated Press, WWD, Fortune, Washington Post, International Herald Tribune, National Post Business Magazine, Boston Globe, The Time and Dow Jones Newswire.

Claudia lives between Rome and Milan.

19

Bain contacts

For a copy of the study or to schedule an interview with Claudia D’Arpizio, please

contact:

• Valeria Falcone at email: valeria.falcone@bain.it or +39 02-582881

• Cheryl Krauss at email: cheryl.krauss@bain.com or +1 646 562 7863

• Frank Pinto at email: frank.pinto@bain.com or +1 917 309 1065