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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.

Bains Luxury Market Update

Milan, April 2009

20092007200620052004

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2This 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.

0

40

80

120

160

200B

1995

76

1996

84

1997

93

1998

98

1999

111

2000

130

2001

134

2002

134

2003

128

2004

134

2005

146

2006

159

2007

170

2008E

170

Worldwide Luxury Goods Market trend (1995-2008 E)

CAGR 95-0014%

CAGR 00-040.8%

11% 10% 5% 14% 17% 3% 0% -5%

+6.5%

CAGR:6.5%

5% 9%

In 2008 the luxury market was flat

+0%

CAGR 04-08 E6%

9%

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In Japan and America the market shrank

2007

4%

11%

13%

34%

38%

170B

2008

5%

12%

12%

33%

38%

170B

-3%

+2%

-10%

+13%

+7%

+0%

Americas

Europe

Japan

Asia-Pacific

Rest of World

Worldwide Luxury Goods Market by Area

YoY 08E vs 07current

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Apparel was the category hit hardest

2007

4%

20%

21%

23%

29%

170B

2008

3%

21%

22%

24%

28%

170B

+3%

-4%

+3%

+4%

-15%

+0%

Worldwide Luxury Market by Category

Accessories

Hard Luxury

Apparel

Perfume and

Cosmetics

Art de la table

YoY 08E vs 07current

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Results worsened quarter by quarter

5

8%

1Q

5.5%

2Q

2.0%

3Q 4Q

-8%

-2,1%1.6% 0.5% 0,0% -2,1%1.6% 0.5% 0,0%

Luxury Goods Market growth by quarter (2008, QoQ growth)

0,0%

Build-up of2008 growthBuild-up of2008 growth

Totalyear+0%

Based on listed companies results

Strong mark-downpolicy executed bywholesale channel

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In 2009 we expect the market to shrinkby 10%

Bain Forecast (April 2009)

0

50

100

150

200B

2008

170

2009FK

153

-10%

Source: Bain analysis

Main Assumptions

First semester averagemarket trend as the worstactual one: -15% to -20%

Slower decrease in the secondhalf of the year: -5% to 0%

Bysemester

By channel

Retail L4L decreasing (-5% to-10%)

Compensation effect to thedecrease of already committednew openings and full

potential of 2008 numerousnew openings

Wholesale crisis as for actualorder campaign (-20%) withaggressive mark-downcampaigns (-30% on 50% ofproducts)

ESTIMATES

At constant exchangerates assuming no

change in the forex for2009

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The decrease will be spread across (almost) allgeographies and categories

Geographic areas Productcategories

Asia Pacificex-China

China

Source: Bain analysis

Japan

Americas

Europe

RoW

-10% -15%

-15%

-10%

-5%

+7%-20%

+2% -10%

-10% -10%Total

Art de la

table

-10%

0%Perfume and

cosmetics

Leather,Shoes &

Accessories

-12%Watches and

Jewelry

Apparel

Other

Total

ESTIMATES

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The markets negative performance is drivenby macro trends affecting luxury consumers

Core markets in recession since 2nd half of 2008

In 2009, GDP expected to continue decreasing in all key markets,

except some emerging countries

Plummeting consumer confidence (-60% in the USA at the moment)

Luxury consumers wealth hit hard by unfolding financial andeconomic crisis: real-estate, financial assets, income

Following the long trend of democratization, large part of the luxurymarket is targeted at the global middle class which is sufferingstrongly

Severe decreases in the wealth of core consumers (real-estate +

financial assets + income)

Decreasing travel flows, cuts in premium travel services

Emerging economies, which provided a strong buffer for the marketin 2008, are slowing down

Instability of exchange rates, volatility of stock markets

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Polarize

Look forvalue

Show Less

Delaypurchase

Entry-to-luxuryconsumer

Aspirationalconsumer

Absoluteconsumer

Buy only entry-to-luxury categories

- Perfumes/ Cosmetics

- Entry items

Focus on trueluxury

Cheap & Chic

Spend less

Shop duringseason-end salesand in outlets

Pay attention tovalue for money

Look for quality

Stop luxury

Start frugality

Stop ostentation

Startunderstatement

Stop visible

categories Start services/experiences

Approach to crisis

Loyal to brandswho are valueproof

Houses

Cars

Important expenses(watches, jewelry,yachts, etc. )

Houses, cars

2nd pair of...

Design furniture

The crisis is changing the behaviors of luxuryconsumers in all price segments

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Despite the crisis, long-term prospects for theluxury market remain strong

Despite current negative trends, marketfundamentals remain strong in the long-run

Growth ofpersonal wealth and HNWIforecasted to recover from the second half of2010

Global GDP forecasted to grow in 2010

New luxury segments are emerging:working women, men, new generations,emerging markets

Continuing growth ofaspirational consumerbase (especially in Asian and emergingmarkets)

New opportunities may come from changingvalues and consumption habits

Growing customer base

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How to manage in turbulent times: 3imperatives to prepare for the next phase

1. Stay tuned to your consumers

2. Push for organic growth

3. Inject cost culture

20092007200620052004

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1. Stay tuned to your consumers

What to do

What to avoid

Know your consumers better Re-think the shopping experience Leverage loyal customers and brand

communities

Localize marketing activities Re-allocate marketing budgets to below-the-line activities

Understand whats in for quality

Fully delegate client relationships tosalespeople

Deploy a global product and marketingapproach

Keep useless complexity in productfeatures

Another catalog

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2. Push for organic growth

The guy that knows about thebooks isnt here today. Id be more

than happy to suggest a bookmark.

What to do

What to avoid

Slow down retail expansion Strengthen entry price offer,

selectively increase other prices Focus on performance improvement

initiatives: CRM, Training,Assortment Mgt, Supply chain

Invest in retaining / hiring talent Keep gaining market share

Increase prices across the entireoffer

Focus on strategic initiatives such asrepositioning, acquisitions, etc.

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3. Inject cost culture

Of course thats only anestimate. The actual cost will

be somewhat more.

What to do

What to avoid

Hunt for profits: G&A, suppliers,working capital, etc.

Bring IT to full potential Streamline processes and organization

Cut strategic costs: marketing,retail, creativity, etc.

Block investments Aggressively cut personnel Under-spend competitors