MILAN — There’s no stopping the growth of luxury goods in 2012 despite social and economic instability worldwide.

This story first appeared in the May 8, 2012 issue of WWD. Subscribe Today.

This year, the sector is expected to report gains of between 6 and 7 percent at constant exchange rates, reaching record sales of more than 200 billion euros, or $261.4 billion at current exchange, according to a Bain & Co. and Fondazione Altagamma study presented on Monday in Milan. Accessories and the hard luxury category, which includes watches and jewelry, remain the best performing divisions.

While conceding there are signs of a “market maturation,” China is still the main engine of growth, India is showing “a new acceleration” and the U.S. and Europe, where sales are boosted by tourist flows, are reporting “strong momentum,” according to Bain & Co. partner Claudia D’Arpizio. Latin America, especially Brazil and Mexico, will also help lift gains. “Final figures at the end of the year will probably be better than our forecasts, benefiting from currency exchanges, and the performance of some markets,” she remarked.

China will grow between 18 and 22 percent. However, India will be the biggest opportunity for luxury goods in the next 10 years, she added.

Sales in 2011 rose 10 percent to 191 billion euros, or $249.6 billion, confirming Bain’s forecasts in October. “The holiday season in 2011 was very strong,” said D’Arpizio, adding that the last quarter of 2011 showed a 10 percent growth, lifted by a “very strong performance” in the U.S. and Asia.

D’Arpizio characterized the year 2012 as “still strong,” although there are markets that are suffering, such as Italy and Spain, and despite political changes in Europe, elections in the U.S. and tax issues in China.

Europe is expected to grow 2 to 4 percent; the Americas 5 to 7 percent; Japan up to 2 percent; Asia-Pacific, excluding China, 14 to 16 percent, and China 18 to 22 percent, reaching sales of between 15 and 16 billion euros, or $19.6 billion and $21 billion.

Russia is “regaining buoyancy” and leading Eastern Europe countries.

The Chinese economy is “slightly slowing down,” as established brands start to see flat like-for-like growth, and government talks about reducing high duties remain “ongoing,” but it is still climbing four to five times faster than the U.S. and Western Europe, with the expansion of international luxury brands in second-, third- and even fourth-tier cities. Online sales are increasingly relevant.

India is expected to grow between 15 and 20 percent in 2012, reaching sales of between 1.1 billion and 1.2 billion euros, or $1.4 billion and $1.5 billion. Bain believes it is “poised to create one of the largest global market opportunities in the next decade,” despite the country’s high duties and a lackluster retail infrastructure. Online shopping is “booming,” and cities such as Chennai, Hyderabad and Pune are emerging as new luxury destinations.

D’Arpizio highlighted the fact that fast-fashion retailers are investing in large flagships in prime locations and are launching more premium lines to trade up, thus increasingly competing with accessible luxury brands. The top tier of the luxury pyramid, which she defined as “absolute luxury,” has outperformed since 2000. This segment reached revenues of around 40 billion euros, or $52.2 billion, in 2011.

Going forward, “luxury fundamentals will remain strong in the medium term,” with luxury goods expected to rise between 7 and 9 percent in the 2011-2014 period, reaching between 235 and 240 billion euros, or $307.2 billion and $313.7 billion, driven by accessories and hard luxury. The growth of Asia is not expected to slow down, mainly pulled by Greater China and Korea but also by new markets in Southeast Asia, such as Vietnam, Malaysia and Indonesia. Similarly, Central Eurasia, which regroups widely different countries, led by Turkey, is a new emerging area, as well as South Africa.

Armando Branchini, executive director of Italy’s luxury goods association Fondazione Altagamma, said that forecasts presented in October under the Altagamma Consensus research were “not changed.” Hard luxury and accessories are expected to grow 10 percent in 2012 and apparel is forecast to gain 6.5 percent. Sales in the U.S. are expected to gain 7 percent; Latin America 14 percent; Japan 2 percent; Asia 16.5 percent; the Middle East 8.75 percent, and Europe 3.75 percent. “Fortunately, the ‘luxury shame’ theory elaborated three years ago by some analysts was totally unfounded,” said Branchini, pointing to the growing appetite for the category.

Earnings before interest, taxes, depreciation and amortization are expected to rise 10 percent in 2012.

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