MILAN — Buckle up.
This story first appeared in the October 22, 2008 issue of WWD. Subscribe Today.
The fashion and luxury goods market is set for a bumpy ride, according to industry experts speaking at the Altagamma conference here Tuesday.
Bain & Co. expects the sector to contract 1 percent in the fourth quarter and by as much as 7 percent in real terms in 2009, which would make it the worst 12 months for the market ever.
Claudia D’Arpizio, a partner at the consultancy’s fashion and luxury goods practice, said it could be a far-from-merry Christmas for the industry, despite currency appreciations against the euro providing some cheer, and that the financial crisis would likely have a major impact on consumption in 2009.
Bain expects Europe to bear the brunt of the slowdown next year and the U.S. and Japan to remain flat, while emerging markets will continue to grow substantially, but not enough to offset the deceleration elsewhere.
The consultancy’s estimates are similar to those of Deutsche Bank, which last week cut its sector earnings per share for the next two years after predicting an organic industry sales decline in 2009 of around 1 percent, from growth of 6 percent, and little rebound in 2010.
Overall in 2008, Bain expects the global luxury goods market to grow 3 percent to 175 billion euros, or $234.8 billion at current exchange, with watches, shoes and leather goods the most resilient categories.
Altagamma, an association of Italian fashion and luxury firms including Bulgari, Salvatore Ferragamo, Tod’s and Versace, said the majority of its member companies expected positive results in 2008, with fashion brands up 5 percent and jewelers up 3 percent.
“The growth is certainly inferior to 2007, but it is solid in the majority of markets, even if Italy and the United States are creating problems this year,” said Armando Branchini, Altagamma secretary general and deputy chairman of Milan-based luxury goods consultancy Intercorporate.
D’Arpizio said the sector’s prospects were strong in the long term, particularly in terms of a constantly growing customer base, but warned 2009 could be the tipping point for some.
She added there were lessons to be learned from the last downturn in 2002.
“The companies that succeeded really in innovating the product, in being really near to the local consumers, in really understanding the needs and the changing habits really made the difference in the second wave,” D’Arpizio said.
She also warned that there was a danger in focusing solely on high growth markets, such as Asia, where luxury consumption is set to rise 15 percent this year, at the expense of Japan and the U.S., which, though suffering, contain the majority of core luxury consumers.