World Business

Luxury goods M&As on horizon

By Andrew Roberts (China Daily)
Updated: 2010-04-17 10:19

A woman looks at the window display of a Louis Vuitton shop on the Champs-Elysees in Paris. [Agencies]

PARIS - The luxury-goods industry may be set for a new wave of mergers, acquisitions and initial public offerings as it recovers from its worst year on record, according to consulting firm Bain & Co.

A 7.8 percent decline in luxury spending to 153 billion euros ($207 billion) in 2009 is "structurally changing" the market, with larger brands taking market share from their smaller rivals, Bain said in a study. "Lagging brands" face the ongoing risk of bankruptcy, said Claudia D'Arpizio, a partner at Bain.

"This polarization creates fertile conditions for market concentration," D'Arpizio said in an e-mailed statement. "The biggest lesson from the crisis is that bigger brands were better equipped to weather and respond."

Only 2 percent of the 220 brands studied saw growth of more than 5 percent in 2009, according to D'Arpizio. Those brands accounted for 10 percent of the luxury market, she said.

Worldwide spending on luxury goods, excluding currency movements, may rise 4 percent this year, bolstered by sales in the United State, Europe and Asia, Bain estimated. China will lead growth, with spending rising 15 percent. Luxury spending in Japan will drop 3 percent, according to the firm.

It's the "end of luxury shame for local consumers in mature markets", Bain said. "Luxury brands are gaining appeal again."

In a separate study, Altagamma, an Italian luxury trade group, said the industry's earnings before interest, taxes, depreciation and amortization will probably rise 16 percent in 2010. The prediction is based on estimates by analysts including Bain's, Altagamma said in an e-mailed statement.

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