Outlook seen challenging for luxury goods in 2009

Tue Oct 21, 2008 11:26am EDT
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By Marie-Louise Gumuchian

MILAN (Reuters) - The luxury goods market is expected to see slowing growth this year and a possible downturn in 2009 as the global crisis and weaker consumer confidence hit the sector, experts said on Tuesday.

Analysts are expecting cracks to appear in the global luxury market, starting with the Christmas period when such companies make a large part of their annual revenues.

Italian jeweler Bulgari was one of the first groups in Europe to warn last month that it expected Christmas sales to be poorer this year than last. According to a study by Bain & Co. presented at the Altagamma luxury goods conference, a strong slowdown is expected for the last quarter for the personal luxury goods market, which includes shoes, jewelry and fashion.

The sector had turnover of 170 billion euros ($225.2 billion) last year and is estimated to reach 175 billion euros in 2008, up 3 percent. This follows a 6.5 percent growth last year.

"The real problem will be Christmas," Claudia D'Arpizio, a partner at Bain & Co., told the conference.

"But I do not think that it will have a devastating effect because there will also be a positive impact of the appreciation of the U.S. dollar in the last quarter."

The fourth quarter is expected to a register a 1 percent fall in business, compared to growth in the previous quarters.

D'Arpizio said the sector could range between a 2 percent fall or 2 percent growth in 2009 at current exchange rates. At constant rates, it could fall 3-7 percent.   Continued...

<p>A view of the newly-built ten-storey flagship store of the Italian jeweller Bulgari called "Bulgari Ginza Tower" (L), Cartier Ginza building (top R) and Chanel Ginza building in Tokyo's Ginza shopping and amusement district December 30, 2007. REUTERS/Issei Kato</p>