Keep calm and care about your consumer - The luxury and cosmetics financial factbook 2016 edition - EY
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Keep calm and care about your consumer The luxury and cosmetics financial factbook 2016 edition
Contents 2 Executive summary
Statistics and key facts
Index evolution
8 DCF and valuation parameters
A. Financial parameters
B. Operating aggregates
C. Advertising expenses
D. SOTP and segment analyses
E. Trading multiples
F. Transaction multiples
36 Industry overview
G. Global luxury goods market
H Global cosmetic goods market
I. Points of view from EY global sector and
other industry professionals
80 Methodology
Approach and SOTP analyses
Sample selection
Focus on YOOX Net–A–Porter
83 Glossary
84 Contact usPage 2 Executive summary
Executive summary
elcome to the sixth edition of EY ann al financial factboo for the l x r and cosmetics
industries. The report combines publicly available data with input from leaders who work
with the world’s leading companies in the sector. It looks at current trends, the evolution
of operating aggregates and e financial parameters.
In 2015, the luxury goods industry experienced 13% growth at current exchange rates,
reaching b ho e er, c rrenc ct ations ere the main contrib tor of this gro th,
with “real” growth reported to be 1%, lower than in 2014. The global cosmetics industry
experienced a higher rate of growth (3.9%), reaching a total market value of €203b in
2015.
an factors contrib te to the state of the mar et. i en the significant impact that the
socioeconomic and political climate can have on a global scale, it would be remiss not
Roberto Bonacina Marco Pier Mazzucchelli to acknowledge this instability early on in our report. While this study aims to provide
Partner, Lead Advisory M&A, Fashion & Luxury Partner, Head of TAS, MED a situational analysis, our conclusion is that the current climate and general instability
Milan, EY S.p.A. Milan, EY S.p.A. across the global financial mar ets, as ell as other intangible elements, are contrib ting
roberto.bonacina@it.ey.com marco.mazzucchelli@it.ey.com to the decline noted across the luxury sector. Recent global political disorder, terrorist
threats and attacks as well as slowdown in economic growth rate in China are relevant
factors that can impact any given industry. In short, uncertainty can have an impact on
the mood of an cons mer, none more so than hen a significant spend is re ired, s ch
as within the luxury sector.
On a brighter note, the luxury consumer has never been so sophisticated and is now
seeking “the complete retail experience,“ ready for a trip to an exotic destination rather
than limiting his or her purchase to the latest “it-bag.“
o sho ld l x r pla ers act to a oid losing their cons mers o ld a ic reaction
s ffice, or do brands need to re ie their entire b siness model
In any case, companies must take time to get to know their consumers better, understand
their desires in order to better engage them, and secure their attention and spend.
The luxury and cosmetics financial factbook 2016Executive summary Page 3
Executive summary
The competitive landscape is changing. To keep pace, luxury brands must: In retail stores, which offer the opportunity to physically interact with consumers,
companies must aim to offer dedicated services by employing knowledgeable and
• Increase the digital effort — Luxury companies are behind in an increasingly digital
highl alified shop assistants ho can pro ide an exceptional cons mer experience.
world. New technology has changed the way companies do business, providing new
his goes be ond ne openings companies sho ld foc s on impro ing the alit
communication channels, with buying behaviors evolving and the emergence of a new
offered in their existing network across every single customer touch point.
segment, the “millennials.” Immediacy is key, so there is a constant need to innovate
within the digital world, which seems to contrast with the exclusivity known for its The 2016 factbook, based on industry leaders’ feedback, offers both operational and
poleposition at the core of the luxury market. Luxury brands have to manage dual financial aggregates on the l x r and cosmetics ind stries as ell as e al ation
aspects; namely to (i) maintain their heritage and create long-term value while (ii) parameters and multiples. It looks at the industries’ future trends and includes input from
responding to cons mers’ expectations and tr ing to offer ni e prod cts that offer o r sector leaders. e hope o find this report to be insightf l and tho ght pro o ing
instant gratification. t is the latter here l x r companies are ris ing losing gro nd to for wider discussion within your organization.
more dynamic, digitally savvy players.
Do not hesitate to contact us with any comments or suggestions.
• Hold the positioning — Another category of players is threatening the balance of luxury
Thank you,
fashion houses: the affordable luxury segment is gaining market share, continuously
offering new products that are both fashionable and competitively priced. Price
positioning is crucial, never more so than today when consumers appreciate and
respond well to transparency given that digital channels provide them with a constant
o of information regarding prod cts’ characteristics orld ide. op end l x r
companies sho ld therefore emphasi e the alit and rarit of their offerings to
encourage their clients to spend more and reduce the risk of cannibalization by more
Roberto Bonacina Marco Pier Mazzucchelli
nimble competitors.
roberto.bonacina@it.ey.com marco.mazzucchelli@it.ey.com
• Defend the luxury experience — During the luxury journey, a consumer is surrounded
by opportunities that may not always be characterized by material, long-term
p rchases instead, the ma ha e intangible or more ephemeral benefits, s ch as
travel, art, epicurean gastronomy. In such an environment, personal luxury goods
companies must demonstrate that they can offer the same level of experience and
customer satisfaction.
The luxury and cosmetics financial factbook 2016Page 4 Executive summary
Statistics and key facts
Global personal Chinese consumers remain Today, beauty is synonymous with personalized products
luxury market the top consumers by and services that enrich consumer experience and its
grew by 1% in country with one-third of relationship with the brands, in all distribution sectors.
2015 at constant the global
exchange market.
The global The accessories segment accounted
1/3
rate.
cosmetics market for about 30% of the
1%
grew by 3.9% global personal
in 2015. luxury goods
~30%
market
3.9%
The online luxury market in 2015.
has grown tenfold since
The company– 2005 and accounted for
owned retail about 7% of total sales Luxury cosmetics remains the most
channels are in 2015. dynamic sector with 5.7% growth,
~7%
growing twice due mostly to
as fast as the e-commerce sales.
5.7%
wholesale channel
at current
exchange rates rrent ct ations, a
and continue to strong US dollar and the
gain market share depreciated Euro helped the New markets, such as India, South Africa and
Turkey, generated more than
>2/3
due to network market to show double-digit
expansion. positive impact on the two–thirds of the beauty
overall market value. market growth in 2015.
2X Social media has made an online platform a critical part of
every brand’s strategy.
The luxury and cosmetics financial factbook 2016Executive summary Page 5
Executive summary
Index evolution
The analysis reported in the graph below shows that the EY luxury and cosmetics index (represented by the companies included in the EY factbook) has outperformed the
market over the last eight years with a total return of 83%, corresponding to an a erage earl significant ret rn of 8%.
This relati e performance act all ill strates the appetite of in estors for an ind str that is characteri ed b solid financial f ndamentals in terms of sales gro th, ma or
profitabilit , resilient international client base and expos re to gro ing mar ets, attrib ting higher al ations to companies related sec rities, despite the economic
instable environment.
Financial markets this year have been characterized by a high level of instability generated by a series of events: geopolitical events, commodities pricing volatility and the
China stock market volatility have all hampered growth.
The EY index is a representation of the l x r and cosmetics companies anal ed ithin the factboo . specific eight has been attrib ted to each compan incl ded in
the EY index based on its market capitalization and revenues (each of these two parameters weighing for a half). The relative weights have been revised for each
company’s inclusion after its initial public offering (IPO). Finally, the evolution of the EY index has been compared to those of the S&P 500 and STOXX Europe 600
indexes, using 1 January 2008 as a starting date (rebased to 100).
l y and c s e ics inde e l i nc pa ed a indices ase as an a y
As of
CAGR
1
250 31 March
2016 08–16
200
183 8%
150
142 4%
100
94 -1% ase as an a y
50 125
As of
120
1 January
115 2016
0
110
16
8
9
0
1
2
3
4
5
8
9
0
1
2
3
4
5
08
8
09
9
10
0
11
1
12
2
13
3
14
4
15
5
16
l0
l0
l1
l1
l1
l1
l1
l1
r0
r0
r1
r1
r1
r1
r1
r1
t0
t0
t1
t1
t1
t1
t1
t1
107
ar
n
n
n
n
n
n
n
n
n
Ju
Ju
Ju
Ju
Ju
Ju
Ju
Ju
Oc
Oc
Oc
Oc
Oc
Oc
Oc
Oc
Ap
Ap
Ap
Ap
Ap
Ap
Ap
Ap
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
M
105
102
EY Index S&P 500 Europe 600 100
99
95
90
85
15
15
15
15
15
15
15
16
15
5
15
5
5
r1
t1
l1
ay
g
v
ar
n
n
c
p
n
b
Ju
Ap
Oc
No
De
Au
Ju
Se
Ja
Fe
Ja
M
M
Source: Capital IQ. EY Index S&P 500 STOXX Europe 600
1. Compound annual growth.
The luxury and cosmetics financial factbook 2016PAGE 6 OPENING DCF and valuation parameters LUXURY AND COSMETICS THE EY FINANCIAL FACTBOOK 2014
Opening Page 7
A Financial parameters
B Operating aggregates
C
DCF and valuation
Advertising expenses
parameters
D SOTP and segment analyses
E Trading multiples
F Transaction multiples
The luxury and cosmetics financial factbook 2016a e DCF and valuation parameters
A Financial parameters Luxury companies reflect moderate but steady growth, with a
limited risk profile
• ranges from afilo to oach , depending on the compan ’s ris profile perception ith an
overall limited variance.
• LTGR presents a larger range (1% to 4.3%) mainly depending on size, maturity stage of the retail network
and prod ct di ersification. he estimated a erage is slightl lo er o erall than last ear’s fig re,
re ecting a pre ailing conser ati e ie among financial mar ets operators abo t f t re gro th.
and yc pany Companies are sorted in
decreasing order based on the Luxury Market capitalization WACC Gearing Beta LTGR
market capitalization in euros companies (in €m)
observed as of 31 March 2016
LVMH
10.5%
(one-month average).
Coach
Michael Kors, Tumi and Hengdeli Richemont
10.0%
are not represented in the graphic Hermès
9.5% Chow Tai Fook at left because LTGR data for them Luxottica
Hugo
Tiffany was not available. Kering
9.0% Boss
Swatch
Ralph Lauren Prada Burberry Brunello
Swatch Cucinelli
WACC
Tod's
Coach
8.5%
Salvatore
Richemont
Ferragamo YOOX Net-A-Porter
Moncler
8.0% Jimmy Choo
Kering
Hermès
Michael Kors n/a
LVMH
i any
7.5%
Luxottica Prada 7,675
afil
7.0%
e y
6.5% Ralph Lauren
0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0%
ai 5,657
LTGR
Hugo Boss
ote b bble si e re ects mar et capitali ation. otted lines represent a erage al es. Salvatore Ferragamo 3,726
Moncler 3,723
Sources: YOOX Net–A–Porter 3,424
• WACC* and LTGR: based on consensus of several brokers reports for each company. Tod’s 2,263
• Market capitalization and beta: EY elaboration based on S&P Capital IQ. Tumi n/a
• earing companies’ financial statements. Brunello Cucinelli
i y 642
Notes:
afil 525
• Market capitalization is based on a one–month average as of 31 March 2016. Hengdeli n/a
• earing is defined as net financial debt E .
Average 8.5% 2.4% 0.92 2.6%
• Beta corresponds to levered beta measured on a weekly basis over a two–year period.
• eta fig res for Y et orter is based on the share of Y .p. ., hich after Median 8.6% 1.4% 0.94 2.6%
the merger with Net-A-Porter changed his name in YOOX Net-A-Porter Group. Maximum 10.0% 29.3% 1.22 4.3%
• ata point denoted as n a represents information not a ailable. Minimum 7.0% (14.3%) 0.68 1.0%
and other terms are defined in the glossar .
The luxury and cosmetics financial factbook 2016DCF and valuation parameters a e
A Financial parameters The cosmetics sample is characterized by stable growth and low
risk, with the exception of Natura
• at ra’s ra il contin es to be significantl higher the the sample’s a erage, dri en b its
geographical coverage.
DCF and valuation
• erage is in enced b the significantl high le el of at ra.
parameters
and yc pany Companies are sorted in
decreasing order based on the Cosmetics Market capitalization WACC Gearing Beta LTGR
16.0%
market capitalization in euros companies (in €m)
15.0% Natura observed as of 31 March 2016
(one-month average).
L'Oréal
14.0%
Estée Lauder
Shiseido is not represented in the
13.0%
graphic at left because LTGR data eie sd
12.0% was not available. Coty
Shiseido n/a
11.0%
Natura
WACC
10.0%
L'Occitane 2,472
9.0%
L'Occitane
Average 9.1% 4.8% 0.86 2.9%
L'Oréal
LVMH Median 7.8% 2.4% 0.86 2.3%
8.0%
Estée Lauder Beiersdorf
Maximum 15.4% 27.2% 0.98 6.6%
7.0%
Minimum 7.0% (12.6%) 0.74 1.8%
Coty
6.0%
0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0%
LTGR
ote b bble si e re ects mar et capitali ation. otted lines represent a erage al es.
Sources:
• WACC and LTGR: based on consensus of several broker reports for each company.
• Market capitalization and beta: EY elaboration based on S&P Capital IQ.
• earing companies’ financial statements.
Notes:
• Market capitalization is based on a one–month average as of 31 March 2016.
• earing is defined as net financial debt E .
• Beta corresponds to levered beta measured on a weekly basis over a two-year period.
The luxury and cosmetics financial factbook 2016a e DCF and valuation parameters
A Financial parameters EY luxury and cosmetics sample:
summary of financial parameters
WACC Gearing Beta LTGR
Safilo 7.0% Richemont (14.3%) Prada 0.68 Ralph Lauren 1.0%
Coty 7.0% L'Occitane (12.6%) Brunello Cucinelli 0.68 L'Occitane 1.8%
Luxottica 7.3% Swatch (9.1%) Chow Tai Fook 0.70
Jimmy Choo 1.8%
Burberry (8.2%) L'Occitane 0.74
L'Oréal 7.8% afil 2.0%
Ralph Lauren (8.0%) Moncler 0.74
Beiersdorf 7.8%
Coty 2.1%
Michael Kors (7.3%) Hermès 0.77
Estée Lauder 7.8%
Michael Kors 0.77 Estée Lauder 2.2%
Beiersdorf (6.4%)
LVMH 8.0%
Tod's (5.8%) Coty 0.78 L'Oréal 2.3%
Kering 8.1%
Tumi (5.7%) Hugo Boss 0.83 Richemont 2.4%
Jimmy Choo 8.1%
Hermès (4.5%) Beiersdorf 0.84
Swatch 2.5%
Moncler 8.2%
Coach (4.3%) L'Oréal 0.86
Prada 2.5%
Hermès 8.2% YOOX Net-A-Porter (0.3%) Tod's 0.86
Coach 2.5%
Richemont 8.3% L'Oréal 0.2% Coach 0.86
YOOX Net-A-Porter 8.3% Kering 2.5%
Salvatore Ferragamo 0.6% Average 0.91
Tod's 8.5% Moncler 1.4% Estée Lauder 0.91 Tiffany 2.5%
Salvatore Ferragamo Salvatore
Hugo Boss 8.6% Prada 1.9% 0.93 2.6%
Ferragamo
Salvatore Ferragamo 8.6% Estée Lauder 2.4% Hengdeli 0.94 Hugo Boss 2.6%
Average 3.0% Natura 0.94
Ralph Lauren 8.6% Beiersdorf 2.6%
Hugo Boss 3.4% Luxottica 0.94
Brunello Cucinelli 8.6% Luxottica 2.6%
Shiseido 4.3% afil 0.94
Swatch 8.6%
Moncler 2.7%
Luxottica 4.3% Kering 0.95
Average 8.7%
Jimmy Choo Average 2.7%
Brunello Cucinelli 5.1% 0.96
Prada 8.8%
LVMH 5.9% LVMH 0.97 Tod's 2.7%
Burberry 8.8%
Tiffany 6.0% Shiseido 0.98 Burberry 2.7%
L'Occitane 8.9%
Chow Tai Fook 8.8% YOOX Net-A-Porter 0.99 LVMH 2.8%
Tiffany 9.0%
Natura 18.5% Tumi 1.00
Chow Tai Fook 3.0%
Hengdeli 9.1% afil 18.7% Tiffany 1.03
Hermès 3.2%
Chow Tai Fook 9.3% Kering 18.7% Ralph Lauren 1.10
YOOX Net-A-Porter 3.6%
Michael Kors 9.7% Jimmy Choo 19.5% Burberry 1.12
Coach 10.0% Coty 27.2% Swatch 1.16 Brunello Cucinelli 4.3%
Natura 15.4% Hengdeli 29.3% Richemont 1.22 Natura 6.6%
WACC 8.7% Gearing Beta 0.91 LTGR 2.7%
3.0%
Low High Low High Low High Low High
Industry benchmark Industry benchmark Industry benchmark Industry benchmark
Source: Data based on consensus of several brokers reports for each company.
Note: LTGR data was not available for Tumi, Shiseido, Michael Kors and Hengdeli.
The luxury and cosmetics financial factbook 2016DCF and valuation parameters a e
B Operating aggregates The sales outlook of luxury companies points to limited growth
opportunities due to underperformance of key markets and a
shift to global pricing
Pricing growth has become a challenge for the luxury peers that have historically achieved ~25% growth
YOOX Net–A–Porter notably outperformed the
through price increases. The popularity of the digital channel has made maintaining price divergence in
average growth levels.
DCF and valuation
different mar ets diffic lt. t re gro th is expected thro gh
parameters
• Introduction of new products at lower price points to drive volumes, addressing the lower end segment
• Improved volumes due to robust tourist–related demand
Sales CAGR, *Kering sales for FY14A–FY18E
exclude numbers for Redcats, Sales CAGR
l yc panies (in €m) FY14A FY15A/E FY16E FY17E FY18E
Sergio Rossi and Groupe Fnac. (FY15A/E–FY18E)
YOOX Net-A-Porter 20.4% LVMH 35,664
Notes:
ncle 11.3% Kering*
• fig res are estimated
Jimmy Choo 10.3% (“E“) or actual (“A“) , depending Richemont
nell cinelli 10.1% on their availability as of the Luxottica 7,652
date of this study. Swatch 7,742
ica 8.1%
• Figures are converted into ai 7,276
ic ael s 8.0% euros, using exchange rates
Ralph Lauren 7,276 7,654
Hermès 7.5% as of 31 March 2016 (Source:
Capital IQ).
Hermès 5,245 5,652
ai 7.2%
• Figures for YOOX Net–A– Michael Kors
e a e 6.6% Porter for FY14 and FY15 are Coach 4,252
Tumi 6.1%
presented on a pro forma basis, i any 3,732
i.e., assuming the merger was Prada 3,552 3,553 3,664
Kering 5.4% effective at the start of FY14.
• Hengdeli is not represented
e y 3,722
5.3%
in the graphic at left because Hugo Boss 2,572
Burberry 5.2%
FY18E data was not available. Hengdeli n/a n/a
Tiffany 5.0% YOOX Net–A–Porter 2,357
Coach 4.9% Salvatore Ferragamo
alp a en 4.8% afil
Swatch 4.7% Tod's
al a e e a a 4.5%
Moncler
Tumi 463 575
Tod's 4.4%
Brunello Cucinelli 356 454 552
Richemont 4.2%
i y 443
afil 3.6% Average 6.6%
Prada 3.0% Median 5.3%
Hugo Boss 2.1% Maximum 20.4%
Minimum 2.1%
Source: Data based on consensus of several brokers reports for each company.
Estimated data have not been derived from internal insights.
The luxury and cosmetics financial factbook 2016a e DCF and valuation parameters
B Operating aggregates Sales growth expectations for cosmetics players are lower than
Hermès
Moncler
35.5%
33.6%
for the luxury segment but the gap is narrowing
Michael Kors 29.0%
Richemont 26.7%
Tiffany 25.1%
L’Occitane and NaturaPrada are expected to post strong24.7%
growth in the next few years, driven by e-commerce sales
’ ccitane and at ra significantl
and emerging brand expansion
Coach for ’ ccitane, and channel di ersification and international gro th for
24.0%
outperformed the cosmetics sample
Natura. TheSalvatore
cosmetics market is likely to be driven
Ferragamo by:
23.5%
expectations. LVMH 23.2%
• Penetration by existing players with innovative products into new markets
Swatch 23.1%
• Increase of consumer purchasing power
Luxottica 22.9%
• Rise of millennial consumers
Tod's 21.3%
Hugo Boss 21.1%
Average 21.0%
Sales CAGR, Notes:
Burberry Sales 20.9% CAGR
c s e ics c panies • fig res are estimated
(in €m) FY14A FY15A/E FY16E FY17E FY18E
(“E“) or actual (“A“), dependingTumi 20.5% (FY15A/E–FY18E)
L'Occitane 9.7% on their availability as of the
Kering L'Oréal 19.1% 22,532 25,257
Natura date of this study.
9.3% Brunello Cucinelli Estée Lauder 17.3%
• Figures are converted into
Shiseido 6.4%
euros, using exchange Ralph Lauren
rates eie sd 17.1% 7,523
Average 5.9% as of 31 March 2016 (Source:
Jimmy Choo
Shiseido 16.8%
Estée Lauder 5.5%
Capital IQ). Coty 3,762
Chow Tai Fook 10.9%
Natura 2,337
L'Oréal 4.2% afil 9.8%
L'Occitane
Beiersdorf 4.0% YOOX Net-A-Porter
Average9.5% 5.9%
Coty 2.0% Hengdeli Median 7.5% 5.5%
Maximum 9.7%
Minimum 2.0%
Source: Data based on consensus of several brokers reports for each company
Estimated data have not been derived from internal insights.
The luxury and cosmetics financial factbook 2016DCF and valuation parameters a e
B Operating aggregates The luxury sample EBITDA margin indicates margin pressure in
the near term
The slightly lower EBITDA margin presented this year is mainly due to:
EBITDA remains largely below 30%, with few
notable exceptions • ar et olatilit dri en b c rrenc s ings and ct ating to rist o s
DCF and valuation
• Lower growth experienced in some of the key markets, such as mainland China and Hong Kong
parameters
Average EBITDA margin, *Kering margin for FY14A–FY16E
excludes numbers for Redcats, EBITDA Average ratio
l yc panies margin FY14A FY15A/E FY16E FY17E FY18E
(FY16E–FY18E)
Sergio Rossi and Groupe Fnac.
Hermès 35.5% LVMH
Notes:
Moncler 33.6% Kering*
• Figures for YOOX Net–A–
Michael Kors 29.0% Porter for FY14 and FY15
Richemont
Richemont 26.7% are presented on a pro–forma Luxottica
basis, i.e., assuming the merger Swatch
Tiffany 25.1%
was effective at the start of ai
Prada 24.7% FY14. Ralph Lauren
Coach 24.0% • The 2015 EBITDA margin
Hermès
Salvatore Ferragamo 23.5% is computed on the basis of
either actual (“A“) or estimated Michael Kors
LVMH 23.2%
E fig res for sales, Coach
Swatch 23.1% depending on their availability. i any
Luxottica 22.9% As some groups are listed Prada
under different jurisdictions
Tod's 21.3% e y
around the world, they may use
Hugo Boss 21.1% different GAAP, and therefore Hugo Boss
Average 21.0% a direct comparison of EBITDA Hengdeli
Burberry 20.9%
may be less meaningful than YOOX Net–A–Porter
if their results were presented Salvatore Ferragamo
Tumi 20.5%
under the International
afil
Kering 19.1% Accounting Standards.
Tod's
Brunello Cucinelli 17.3%
Moncler
Ralph Lauren 17.1%
Tumi
Jimmy Choo 16.8%
Brunello Cucinelli
Chow Tai Fook 10.9%
i y
afil 9.8% Average 21.4% 20.0% 20.7% 21.0% 21.3% 21.0%
YOOX Net-A-Porter 9.5% Median 21.6% 21.0% 21.0% 21.5% 21.5% 21.3%
Hengdeli 7.5% Maximum 35.1% 35.4% 35.6% 35.7% 35.2% 35.5%
Minimum 6.7% 5.7% 7.1% 7.5% 7.9% 7.5%
Source: Data based on consensus of several brokers reports for each company.
Estimated data have not been derived from internal insights.
The luxury and cosmetics financial factbook 2016a e DCF and valuation parameters
B Operating aggregates Cosmetics companies maintain last year’s average EBITDA of
Jimmy Choo 8.5%
18% for the FY16E–FY18E period
Prada 8.3%
Coach 7.2%
Hugo Boss 6.7%
Swatch
Cosmetics companies are expected6.7%
to report expansion in operating margins in the coming years.
L’Oréal and Estée Lauder are showing Tumi 6.5%
o tperforming profitabilit . The key
YOOX drivers of margin growth 6.4%
Net-A-Porter are:
• Increasing disposable income and
Hermès 6.3%improving lifestyle of individuals
Burberry
• Demand for high-end products 6.3%
(presenting higher margins)
Michael Kors 6.3%
Richemont 5.8%
Tiffany 5.6%
Average 5.6%
Average EBITDA margin, Note: the 2015
Salvatore EBITDA margin is
Ferragamo 5.5%
computed onLuxottica
the basis of either EBITDA Average ratio
c s e ics c panies 5.5% FY14A FY15A/E FY16E FY17E FY18E
actual (“A“) or estimated (“E“) margin (FY16E–FY18E)
Brunello Cucinelli 5.5%
L'Oréal 21.9% fig res for sales, depending
Tod's
L'Oréal
Estée Lauder
on their availability. As some 5.3%
20.2% Estée Lauder
groups are listed under different
LVMH 5.1%
Natura 19.4% jurisdictions around the world, eie sd
Moncler 5.0%
Coty 19.0% they may use different GAAP, and Shiseido
Kering
therefore a direct comparison of 4.9%
Average
Coty
18.0% EBITDA may beLauren
less meaningful
Ralph 4.7%
Natura
L'Occitane 18.0% than if their results were presented
afil 3.3%L'Occitane
under International Accounting
Beiersdorf 17.6% Chow Tai Fook 2.0% Average 17.4% 16.7% 17.5% 18.0% 18.6% 18.0%
Standards.
Shiseido 10.3% Hengdeli 0.8% Median 19.0% 17.1% 18.3% 19.1% 19.5% 19.0%
Maximum 21.1% 21.1% 21.5% 21.8% 22.2% 21.9%
Minimum 11.7% 8.8% 9.4% 10.2% 11.2% 10.3%
Source: Data based on consensus of several brokers reports for each company.
Estimated data have not been derived from internal insights.
The luxury and cosmetics financial factbook 2016DCF and valuation parameters a e
B Operating aggregates Stable CAPEX sales ratio reflects that high investments are
required to support long–term growth
The stable a erage le el of a to E sales ratio is mainl explained b the re irements of the retail
Jimmy Choo outperforms on the CAPEX ratio.
network (openings, renovations, etc.) for continued growth.
Its CAPEX has been characterized by higher
DCF and valuation
parameters
logistics costs and store renovations, and is
expected to increase heavily as the company
makes additional investments in its retail
network.
Average CAPEX ratio, Note: the 2015 CAPEX ratio is
computed on the basis of either CAPEX Average ratio
l yc panies FY14A FY15A/E FY16E FY17E FY18E
actual (“A“) or estimated (“E“) ratio (FY16E–FY18E)
Jimmy Choo 8.5% fig res for sales, depending
LVMH
on their availability.
Prada 8.3% Kering
Coach 7.2% Richemont
Hugo Boss 6.7% Luxottica
Swatch 6.7% Swatch
Tumi 6.5% ai
YOOX Net-A-Porter 6.4%
Ralph Lauren
Hermès
Hermès
6.3%
Michael Kors
Burberry 6.3%
Coach
Michael Kors 6.3%
i any
Richemont 5.8%
Prada
Tiffany 5.6% e y
Average 5.6% Hugo Boss
Salvatore Ferragamo 5.5% Hengdeli
Luxottica 5.5% YOOX Net–A–Porter
Brunello Cucinelli 5.5% Salvatore Ferragamo
Tod's 5.3% afil
LVMH 5.1%
Tod's
Moncler
Moncler 5.0%
Tumi
Kering 4.9%
Brunello Cucinelli
Ralph Lauren 4.7%
i y n/a
afil 3.3% Average 5.9% 5.9% 6.0% 5.5% 5.1% 5.6%
Chow Tai Fook 2.0% Median 6.1% 5.9% 6.0% 5.7% 5.2% 5.6%
Hengdeli 0.8% Maximum 12.4% 9.6% 9.3% 8.7% 7.0% 8.5%
Minimum (1.6%) 1.1% 0.8% 0.8% 0.9% 0.8%
Source: Data based on consensus of several brokers reports for each company.
Estimated data have not been derived from internal insights.
The luxury and cosmetics financial factbook 2016a e DCF and valuation parameters
B Operating aggregates Capital requirements for cosmetics companies are lower than in
the luxury sector
L’Occitane’s ratio o tperforms the sample d e to its retail profile.
Average CAPEX ratio, Note: the 2015 CAPEX ratio is
computed on the basis of either CAPEX Average ratio
c s e ics c panies actual (“A“) or estimated (“E“) FY14A FY15A/E FY16E FY17E FY18E
ratio (FY16E–FY18E)
fig res for sales, depending
L'Occitane 5.5%
on their availability. L'Oréal
Natura 4.5%
Estée Lauder
L'Oréal 4.4% eie sd
Estée Lauder 4.4% Shiseido n/a
Coty 4.1%
Coty
Natura
Average 4.1%
L'Occitane
Beiersdorf 3.0% Average 4.5% 3.9% 4.2% 4.1% 4.3% 4.1%
Shiseido 2.9% Median 4.4% 3.9% 4.4% 4.4% 4.3% 4.4%
Maximum 6.8% 5.5% 5.5% 5.4% 5.7% 5.5%
Minimum 2.0% 2.6% 2.9% 2.8% 3.1% 2.9%
Source: Data based on consensus of several brokers reports for each company.
Estimated data have not been derived from internal insights.
The luxury and cosmetics financial factbook 2016DCF and valuation parameters a e
B Operating aggregates EY luxury and cosmetics sample: summary of operating
aggregates
The charts below show the evolution of selected operating aggregates (sales CAGR, EBITDA margin, CAPEX ratio) over the past editions of The luxury and cosmetics
financial factbook. Data reported represents estimates available for future years at the date of each factbook release.
DCF and valuation
parameters
1. Luxury
Average sales CAGR Average EBITDA margin Average CAPEX ratio
12% 10.5% 27% 6.0%
10.4% 25.1% 5.7%
10% 9.3% 25% 24.6% 24.3% 5.6%
8.6% 5.4%
5.5% 5.3%
8% 23% 22.6%
6.6%
21.0%
6% 21% 5.0% 4.9%
4% 19%
4.5%
2% 17%
0% 15% 4.0%
FY12 FY13 FY14 FY15 FY16 FY12 FY13 FY14 FY15 FY16 FY12 FY13 FY14 FY15 FY16
• n an increasingl challenging mar et, f t re expected gro th is slo ing do n b t still sho s significant gro th le els.
• This slowdown in sales growth directly impacts the EBITDA margin aggregates, which also show a gradual contraction over the considered period.
• he E ratio is stable at to , ill strating a high re irement of in estments, d e to a progressi e shift to the retail business.
Source: Data based on consensus of several brokers reports for each company.
The luxury and cosmetics financial factbook 2016a e DCF and valuation parameters
B Operating aggregates EY luxury and cosmetics sample: summary of operating
aggregates
The charts below show the evolution of the operating aggregates estimates (sales CAGR, EBITDA margin, CAPEX ratio) over the past editions of The luxury and
cosmetics financial factbook. for cosmetics companies. Data reported represents only estimates available for the next few years at the date of the factbook release.
2. Cosmetics
Average sales CAGR Average EBITDA margin Average CAPEX ratio
12% 20% 5.0%
10% 18.9% 4.5%
8.2% 8.3% 19% 4.4%
18.2% 4.5%
8% 18.0% 18.0% 4.2%
6.1% 6.5% 18% 17.8% 4.1%
5.8% 4.0%
6% 4.0%
17%
4%
3.5%
2% 16%
0% 15% 3.0%
FY12 FY13 FY14 FY15 FY16 FY12 FY13 FY14 FY15 FY16 FY12 FY13 FY14 FY15 FY16
• The cosmetics sector, on average, has lower sales CAGR and EBITDA margins than the luxury sector, but the difference has been narrowing over the years. While
the EBITDA margin expected for the cosmetics sector remains 3% lower than the luxury sample, the average sales CAGR of cosmetics is almost the same of luxury
companies (6.5% versus 6.6%, respectively).
• Expected sales obser ed in is higher than fig res, b t considerabl lo er than the pea of .
• The EBITDA margin has remained globally stable over the considered period, at a solid level around 18%.
• The CAPEX ratio is lower for luxury companies and mostly stable at 4.2%.
Source: Data based on consensus of several brokers reports for each company.
The luxury and cosmetics financial factbook 2016DCF and valuation parameters a e
C Advertising expenses Advertising remains a key driver in the industry, with digital
expenses’ share growing fast
• ar eting and ad ertising represent a significant cost component for both global l x r and cosmetics
industries.
DCF and valuation
• igital expenses are gaining share in the ad ertising b dget of companies, as in encers, nstagrammers
parameters
and social networks are replacing traditional channels.
• Communication media is now so diverse that companies can only focus on and allocate budget for some of
the channels; in some cases, companies are dedicating more budget to communicating on new platforms.
elec ed c panies ad e isin e penses as a sales
40% Average 26.8%
33.6%
35%
29.1%
30% 26.4%
25.7%
25% 22.9% 22.9%
20%
Average 6.7%
15% 11.3% 11.3%
10% 6.8% 7.4%
5.6% 6.6% 6.7%
5.1% 5.4%
5% 3.4% 3.8%
0%
Coach
Salvatore
Ferragamo
Prada
Brunello
Cucinelli
Moncler
Luxottica
Hugo Boss
Tiffany
Tumi
LVMH
Beiersdorf
Coty
Estée Lauder
Shiseido
L'Oréal
Natura
afil
Luxury companies Cosmetics companies
Source: Data based on actual or estimated numbers based on availability as of the date of this report.
ote he res lts of are act al if the financial res lts are closed and expected E if the financial ear is not closed et.
The luxury and cosmetics financial factbook 2016a e DCF and valuation parameters
D SOTP and segment analyses LVMH SOTP
• anal sis implies a total enterprise al ation of . b in Y E.
• The fashion and leather goods segment is the largest contributor both in terms of sales (35%) and EBIT
(52%).
ales ea d n in ea d n in ea d n in
1.0 7.0 17.2 0.0 106.9
11.7 36.1
1.4 15% 21.9 16% 0%
31%
20% 20%
3.6 0.5 7.6
0.5 9.9
3.5 10%
13% 7% 13% 7% 13%
3.7 51.5
8% 9%
4.8 10%
9%
12.7 13%
13%
52% 48%
35%
(0.3) (0.1) (1.3)
-2% -1%
Fashion Perfumes Watches Wines Selective Eliminations Total Fashion Perfumes Watches Wines Selective Eliminations Total Fashion Perfumes Watches Wines Selective Eliminations Investments Total
and and and and retailing and and and and retailing and and and and retailing
leather cosmetics jewelry spirits leather cosmetics jewelry spirits leather cosmetics jewelry spirits
goods goods goods
Luxury products Luxury products Luxury products
(excluding wines and spirits (excluding wines and spirits (excluding wines and spirits
and selective retailing) and selective retailing) and selective retailing)
o rces based on EY anal sis and on the follo ing bro ers reports an ar , ac arie esearch ecember and atixis ecember .
The luxury and cosmetics financial factbook 2016DCF and valuation parameters a e
D SOTP and segment analyses Kering SOTP
• ering anal sis implies a total E of . b in Y E.
• ontrib ting almost the hole of the total E for of sales, cci ro p is the most profitable
DCF and valuation
segment in terms of operating margin.
parameters
ales ea d n in ea d n in ea d n in
0.3 0.0 12.0 0.1 0.0 1.8
3.5 0.1 27.8
1.9 2.1
0% 6%
3% 1% 27.3 8% 1%
29%
8.2
103% 98%
68%
(0.2) (1.7)
-9% -6%
Gucci Group Puma Other brands Eliminations Total Gucci Group Puma Other brands Eliminations Total Gucci Group Puma Other brands Eliminations Total
Luxury Sport and lifestyle Luxury Sport and lifestyle Luxury Sport and lifestyle
o rces based on EY anal sis and on the follo ing bro ers reports arcla s ebr ar , an ar and ac arie esearch ecember .
The luxury and cosmetics financial factbook 2016Page 22 DCF and valuation parameters
D SOTP and segment analyses Kering: further analysis of Gucci Group through SOTP approach
• cci ro p anal sis implies an E of . b in Y E.
• Within the Gucci Group segment, the Gucci brand alone represents 49% of the top line and 60% of EBIT in
FY16E, meaning that the Gucci brand is expected to constitute the largest segment within the Gucci Group
and the most profitable in terms of operating margin.
ales ea d n in ea d n in ea d n in
1.7 8.2 0.2 1.9 3.6 27.3
0.2
8%
3.7 13%
21% 0.4 10%
1.1
5.9 14%
1.4 13% 22%
1.1
22%
4.0 17% 14.1
60%
49% 52%
Gucci brand Bottega Veneta YSL Other brands Gucci Group Gucci brand Bottega Veneta YSL Other brands Gucci Group Gucci brand Bottega Veneta YSL Other brands Gucci Group
o rces based on EY anal sis and on the follo ing bro ers reports arcla s ebr ar , an ar and ac arie esearch ecember .
The luxury and cosmetics financial factbook 2016DCF and valuation parameters Page 23
D SOTP and segment analyses L’Oréal segment analysis
• The L’Oréal Luxe division accounted for 29% of the total sales in FY15A.
• This division is expected to register a sales growth at a CAGR of 4.4% over the 2015A–18E period, when its
DCF and valuation
operating income is anticipated to grow from €1.5m to €1.8m (or at a CAGR of 4.2%) over the same period.
parameters
• The L’Oréal Luxe division will remain one of the biggest divisions within L’Oréal, together with consumer
products.
ales ea d n in ea d n in a in in
30
27.2 5 4.9 22%
27.0 4.9 21% 21% 21%
25.8 4.6 2% 1%
25.3 4% 4% 20%
25 4.4
4% 2% 11%
4% 10% 19% 19%
22.5 8% 1%
8% 3.9 10% 18% 18% 18%
7% CAGR 4 CAGR
4% 7% 9%
2% 4.2%
4.4%
20 10%
7% 29% 35% 36%
30%
29% 29% 35%
34%
3
28% 33%
15
CAGR CAGR
0.9% 2.2%
2
10 45%
46% 46% 53% 53%
54% 54%
48% 47% 56%
1
5
13% 13% 13% 13% 13% 16% 15% 15% 15% 15%
0 0
(16%) (15%) (15%) (15%) (15%)
2014A 2015A 2016E 2017E 2018E
2014A 2015A 2016E 2017E 2018E 2014A 2015A 2016E 2017E 2018E L'Oreal Luxe Total cosmetics
Professional products Consumer products Professional products Consumer products
L'Oreal Luxe Active cosmetics L'Oreal Luxe Active cosmetics
Body shop Eliminations Body shop
Sources: Liberum (15 February 2016) and Kepler Cheuvreux (12 February 2016).
ote he res lts of are act al if the financial res lts are closed and expected E if the financial ear is not closed et.
The luxury and cosmetics financial factbook 2016Page 24 DCF and valuation parameters
E Trading multiples Level of multiples is affected by high volatility of financial
markets
• The charts below show the evolution of the trading multiples over the past editions of the factbook.
• After reaching a peak in 2014, trading multiples for luxury companies are decreasing on all major valuation
parameters, consistently with the lower growth expectations and margins showed by the listed company in
this sector.
EV/sales EV/EBITDA Price to earnings
4.0x 18.0x 35.0x
3.7x
3.6x
3.5x 16.0x 15.0x 15.3x 29.4x
3.3x 30.0x 28.2x
3.1x
3.0x 3.0x 14.0x 13.3x 13.3x
3.0x 12.7x 25.0x 25.2x
2.8x 24.1x 24.5x
2.7x 12.0x 11.9x 25.0x
12.0x 11.6x 22.0x
10.7x 21.4x
2.5x 2.3x 20.4x
2.2x 10.3x
20.0x 19.1x
10.0x
2.0x
8.0x 15.0x
1.5x
6.0x
10.0x
1.0x
4.0x
0.5x 5.0x
2.0x
0.0x 0.0x 0.0x
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
Multiple on last FY Actual Multiple on current FY Forecast Multiple on last FY Actual Multiple on current FY Forecast Multiple on last FY Actual Multiple on current FY Forecast
Source: Data based on consensus of several brokers reports for each company.
Note: Year is referred to the Factbook edition. As an example 2016 is Factbook 2016 edition. Therefore “Multiple on last FY Actual” is calculated on 2015 results, while “Multiple on current FY forecast” is calculated on 2016 expected
results.
The luxury and cosmetics financial factbook 2016DCF and valuation parameters Page 25
E Trading multiples Cosmetics multiples level illustrates the strong dynamism of the
industry
• The charts below show the evolution of the trading multiples over the past editions of the factbook.
• Trading multiples for cosmetics companies showed more resilience over time, as the sector’s listed
DCF and valuation
companies are experimenting a stable gro th o er the last fe ears and a constant profitabilit .
parameters
EV/sales EV/EBITDA Price to earnings
3.0x 18.0x 35.0x 33.1x
2.8x 32.2x
2.6x 15.6x
2.5x 2.5x 16.0x 15.0x
14.6x 30.0x 28.9x
2.5x 2.4x 2.4x 14.4x 28.2x 27.7x
2.3x 14.1x 13.8x 26.9x
2.2x 2.2x 14.0x 13.1x 13.4x 25.8x 25.2x
2.1x 24.4x
12.3x 25.0x
2.0x 12.0x 11.3x 22.2x
20.0x
10.0x
1.5x
8.0x 15.0x
1.0x 6.0x
10.0x
4.0x
0.5x
5.0x
2.0x
0.0x 0.0x 0.0x
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
Multiple on last FY Actual Multiple on current FY Forecast Multiple on last FY Actual Multiple on current FY Forecast Multiple on last FY Actual Multiple on current FY Forecast
Source: Data based on consensus of several brokers reports for each company.
Note: Year is referred to the Factbook edition. As an example 2016 is Factbook 2016 edition. Therefore “Multiple on last FY Actual” is calculated on 2015 results, while “Multiple on current FY forecast” is calculated on 2016
expected results.
The luxury and cosmetics financial factbook 2016Page 26 DCF and valuation parameters
E Trading multiples EY luxury and cosmetics sample: summary of EV/sales multiples
sales sales sales sales
He s He s He s He s
M ncle M ncle M ncle M ncle
al al al al
s e a de s e a de s e a de s e a de
i y y y
y i i i
ica ic e n ic e n ic e n
ic e n ica ica ica
nell cinelli nell cinelli al a e e a a al a e e a a
al a e e a a al a e e a a eie sd eie sd
eie sd eie sd nell cinelli nell cinelli
ac ac ac ac
i any i any ada ada
e a e 2. i any i any
2. e a e
e in 2. ada 2. e a e e a e
ada 2. e in e y e y
e y e y e in e in
ds 2. ds ds ds
e e 2. ic ael s ic ael s ic ael s
ic ael s a c a c a c
a c i y i y i y
i y e e a a a a
a a a a e e e e
cci ane cci ane cci ane cci ane
ss 1. ss 1. ss ss
iseid 1.3 iseid iseid iseid
alp a en alp a en alp a en alp a en
ai 0.9 ai 0.9 ai ai
afil afil afil afil
en deli en deli en deli en deli
sales sales sales sales
Hi h Hi h Hi h Hi h
Ind s y ench a Ind s y ench a Ind s y ench a Ind s y ench a
Source: Data based on consensus of several brokers reports for each company.
Notes:
• he res lts of are act al if the financial res lts are closed and expected E if the financial ear is not closed et.
• Market capitalization is based on a one-month average as of 31 March 2016.
The luxury and cosmetics financial factbook 2016DCF and valuation parameters Page 27
E Trading multiples EY luxury and cosmetics sample: summary of EV/EBITDA
multiples
DCF and valuation
YOOX Net-A-Porter 27.0x YOOX Net-A-Porter 21.0x Hermès 15.8x Hermès 15.1x
parameters
Hermès 18.6x Hermès 17.1x YOOX Net-A-Porter 15.6x YOOX Net-A-Porter 14.0x
Coty 17.5x Coty 16.2x Coty 15.4x Coty 13.8x
Estée Lauder 17.5x Estée Lauder 16.0x al 14.9x al 13.4x
nell cinelli 16.7x al 15.8x Estée Lauder 14.7x Estée Lauder 12.5x
al 16.5x nell cinelli 14.9x Tumi 13.7x Tumi 12.4x
Beiersdorf 15.7x Beiersdorf 14.7x Beiersdorf 13.6x Beiersdorf 12.1x
Shiseido 15.0x Tumi 14.1x nell cinelli 13.4x nell cinelli 10.9x
Tumi 14.1x Shiseido 12.9x Shiseido 11.4x Shiseido 10.0x
Luxottica 13.5x Luxottica 11.7x Luxottica 10.8x Luxottica 9.9x
Coach 12.9x e in 11.6x e in 10.6x e in 9.7x
ncle 12.6x ncle 11.2x al a e e a a 10.2x al a e e a a 9.3x
e in 12.6x e a e 11.1x e a e 10.1x e a e 9.3x
e a e 12.3x al a e e a a 10.8x ncle 10.0x ncle 9.2x
Jimmy Choo 12.2x Coach 10.7x Richemont 9.9x Richemont 9.2x
al a e e a a 11.7x Jimmy Choo 10.5x Coach 9.7x Coach 9.2x
Richemont 10.8x Burberry 10.2x Burberry 9.6x Burberry 9.1x
Tod's 10.6x Richemont 10.1x Jimmy Choo 9.3x Jimmy Choo 8.6x
Natura 10.4x LVMH 9.7x LVMH 9.1x LVMH 8.5x
LVMH 10.2x Tod's 9.5x Tod's 8.8x Tod's 8.4x
Burberry 10.2x Natura 9.2x Prada 8.6x Prada 8.1x
Tiffany 10.0x Tiffany 9.1x Tiffany 8.5x Tiffany 8.0x
Swatch 9.9x Prada 9.0x Natura 8.2x Natura 7.8x
L'Occitane 9.8x L'Occitane 8.9x L'Occitane 8.0x L'Occitane 7.3x
Prada 9.8x Swatch 8.4x Swatch 7.9x Swatch 6.8x
Chow Tai Fook 9.1x Chow Tai Fook 8.4x Chow Tai Fook 7.4x Chow Tai Fook 6.5x
en deli 7.3x ic ael s 6.9x Hugo Boss 6.3x Hugo Boss 6.3x
ic ael s 6.9x Hugo Boss 6.6x ic ael s 6.3x ic ael s 5.6x
Hugo Boss 6.7x alp a en 5.9x afil 6.1x afil 5.6x
afil 6.5x en deli 5.7x alp a en 5.3x alp a en 4.9x
alp a en 6.4x afil 4.7x en deli 5.0x en deli 4.2x
EV/EBITDA (FY15A/E) EV/EBITDA (FY16E) EV/EBITDA (FY17E) EV/EBITDA (FY18E)
12.3x 11.1x 10.1x 9.3x
Low High Low High Low High Low High
Industry benchmark Industry benchmark Industry benchmark Industry benchmark
Source: Data based on consensus of several brokers reports for each company.
Notes:
• Market capitalization is based on a one-month average as of 31 March 2016.
• he res lts of are act al if the financial res lts are closed and expected E if the financial ear is not closed et.
The luxury and cosmetics financial factbook 2016a e DCF and valuation parameters
E Trading multiples Regression analysis: EV/sales multiple vs. EBITDA margin
• egression anal ses sho strong correlation bet een E sales le els and profitabilit , ill strating the
premi m paid for good profitabilit performance.
• nal ses sho a rob st correlation bet een E E and sales gro th. ales de elopment is another
driver for creating value, especially for the luxury segment.
e essi n analysis sales l iple s a in e essi n analysis l iple s sales
7.0x 25.0x
Hermès
YOOX Net-A-Porter
6.0x
R² = 0.505
R² = 0.5575 20.0x
5.0x Hermès
Brunello Cucinelli
15.0x
EV/EBITDA 2016E
Tumi
4.0x
2016 EV/sales
Coach
L'Oréal Moncler
Salvatore Kering Luxottica
Estée Lauder Salvatore Ferragamo Moncler
Ferragamo
3.0x Coty Tumi
Jimmy Choo
Brunello Cucinelli Luxottica 10.0x Richemont Burberry
Richemont
Tod's LVMH
Beiersdorf Kering Coach Tiffany Chow Tai Fook
Tiffany Swatch
YOOX Net- Burberry
2.0x LVMH Michael Kors Prada Michael Kors
A-Porter Prada
Tod's Hengdeli
Jimmy Choo Hugo Boss
Swatch
Natura Ralph Lauren
Shiseido L'Occitane 5.0x
Hugo Boss Safilo
1.0x
Chow Tai Fook Ralph Lauren
Hengdeli Safilo
-
0% 5% 10% 15% 20% 25% 30% 35% 40% -10% -5% 0% 5% 10% 15% 20% 25%
2016 EBITDA margin (%) Sales CAGR 2016E–2018E
Source: Data based on consensus of several brokers reports for each company.
Notes: market capitalization is based on a one–month average as of 31 March 2016.
The luxury and cosmetics financial factbook 2016DCF and valuation
parameters
The luxury and cosmetics financial factbook 2016a e DCF and valuation parameters
F Transaction multiples Transaction multiples in the luxury industry remain at a
significant premium to many other sectors
• Transaction multiples illustrate the high attractiveness of the industry over the past few years.
• he also re ect a premi m to rarit , indeed the brands rep ted to be on the mar et are er fe .
• The average sales multiple in recent years ranged between 1.2x and 1.6x, when the average EBITDA
multiple ranged between 10.4x and 15.0x.
• e transaction anno nced in ere the ac isition of ornelian b n estcorp and the ac isition of
oger i ier b ods.
sales
1.8x 16.0x 15.0x
14.6x
1.6x 1.6x 1.6x 14.2x 14.1x
1.6x 1.5x 1.5x 1.5x 14.0x 13.1x 13.4x
12.8x
1.4x
12.0x
1.2x 1.2x 10.7x 10.4x10.2x
1.2x 1.1x
10.0x
1.0x 0.9x
8.0x
0.8x
6.0x
0.6x
4.0x
0.4x
0.2x 2.0x
0.0x 0.0x
2012 2013 2014 2015 1H16 2012 2013 2014 2015 1H16
Average Median Average Median
Source: Capital IQ.
The luxury and cosmetics financial factbook 2016DCF and valuation parameters a e
F Transaction multiples The M&A deals in the cosmetics industry show a similar trend as
the luxury industry
• he a erage sales m ltiple o er the last fi e ears ranged bet een . x and . x, hen the E m ltiple
ranged between 10.1x and 16.6x.
DCF and valuation
•E E m ltiples in are slightl lo er than and incl de the ac isition of the ea t
parameters
i ision b ot and the ac isition of on b erber s.
sales
2.5x 18.0x
16.6x
2.1x 16.0x 14.9x
2.0x 1.9x 1.9x
14.0x
12.6x
1.6x 1.6x 11.7x
1.5x 12.0x 11.1x 11.0x 10.9x
1.5x 1.4x 10.1x 10.2x
1.2x 10.0x 8.8x
1.1x
1.0x 8.0x
1.0x
6.0x
0.5x 4.0x
2.0x
0.0x 0.0x
2012 2013 2014 2015 1H16 2012 2013 2014 2015 1H16
Average Median Average Median
Source: Capital IQ.
The luxury and cosmetics financial factbook 2016Page 32 DCF and valuation parameters
F Transaction multiples Analysis of worldwide M&A transactions in the luxury industry
(2012–1H16)
• As shown in the number of completed deals sorted by geography and accounts for almost one-third of total
deals, Italy is the top target country of the luxury industry. Italy and US together represent more than an
half of total deals (59% of total transactions).
• ri ate e it f nds ha e a gro ing interest in the l x r sector, recentl approx. of total
transactions.
• fter a characteri ed b a large n mber of transactions, the deal acti it in the first semester of
2016 has slowed down.
e c ple ed deals e c ple ed deals y ype ye e c ple ed deals s ed y
e ap y e a e e
a n e p c n ies
S. Korea
80 50 50% China 2% Canada
Spain 2% 2%
45 43 47% 45% 3%
70 68
41 41 Germany
62 40 40% 4% Italy
40% 30%
60
35 34% 35%
52 UK
31
50 9%
44 30 30%
No. of deals
27
30%
40 25 25%
21
Switzerland
20 20%
30 9%
17%
15 13 15%
19
20 10
10 9 9 10%
France
10
5 5% 10%
United
0 0 0% States
2012 2013 2014 2015 1H16 2012 2013 2014 2015 1H16 29%
Corporate PE PE/total
Sources: Capital IQ, Mergermarket, Factiva.
The luxury and cosmetics financial factbook 2016DCF and valuation parameters Page 33
F Transaction multiples Analysis of worldwide M&A transactions in the cosmetics
industry (2012–1H16)
• As shown in the number of completed deals sorted by geography, and account for almost half of total deals,
US remains the top target country for the cosmetics industry.
DCF and valuation
• he first three co ntries b target geography (US, France and Italy) are the same of those of the luxury
parameters
industry, and they represent 68% of total transactions.
• PE funds are increasingly attracted by the cosmetic market and the personal care sector in general.
e c ple ed deals e c ple ed deals y ype ye e c ple ed deals s ed y
e ap y e a e e
a n e p c n ies
45 35 70% Australia
Spain China
4% Canada
31 Germany 4% 4%
40 39 62% 4%
30 60% 5%
28 United
35 States
35 UK
5% 41%
25 50%
30
S. Korea
26
20 40% 6%
25
21 33%
No. of deals
16
20 15 14 14 30%
17 Italy
21% 20% 8%
15 10
10 20%
8 18%
10 7 7
5 10%
5 3
France
0 0 0% 19%
2012 2013 2014 2015 1H16 2012 2013 2014 2015 1H16
Corporate PE PE/total
Sources: Capital IQ, Mergermarket, Factiva.
The luxury and cosmetics financial factbook 2016Industry overview
G Global luxury goods market
H Global cosmetic goods market
Points of view from EY global sector
I and other industry professionals
Industry overview
The luxury and cosmetics financial factbook 2016Page 36 Industry overview
Global luxury goods market
Retail Directly Operated Stores (DOS) Personal luxury goods Chinese consumers represent the
accounted for about 29% of the overall have the second largest share of buyers in the world,
market, while monobrand distribution across largest market share of accounting for about 31% of global
~29%
formats approximately 24.2% in luxury goods purchases.
accounts the luxury goods market.
for about
~31%
Retail DOS
~53%
53%
of overall
distribution.
Monobrand distribution
Retail sales account for The Hong Kong
Japan is the top performing area
34% in 2015 and have and Macau
~24.2%
for the luxury goods market
grown by 2% since 2014, markets posted
(+9% growth at a constant
while wholesale represent a significant
rate , and in , it as the first
66% of the total personal contraction
foreign destination for Chinese
66%
luxury due to
consumers.
goods currency As accessible status
market. ct ations, s mbols, shoes benefit
Wholesale
+9%
government from strong tailwinds
34%
reforms and and have been growing
decreasing faster than
popularity. the overall growth
Retail
leather goods
category in
the recent
past.
The luxury and cosmetics financial factbook 2016DCF
Industry
and overview
valuation parameters Page 37
Executive summary
G
H Global luxury
luxurygoods
goodsmarket Title
Globalfor section
personal luxury goods continue to buoy the market, but
growth is leveling off
• Personal luxury goods have the second largest marketXshare
Sales(approximately 24.2%)
of industry players areinexpected
the luxury
to goods market
grow at afterrate,
a healthy luxury
led cars, which account
by double-digit forgrowth
annual about arate
38.8%
for
Welcome
share to the
in the third edition of EY’s annual
industry. L’Occitane and Natura from FY11A to FY14E.
Financial Factbook for the luxury and cosmetics
DCF and valuation
• Global luxury market value stood at €1 trillion in 2015,Xwith the personal
Increased demand luxury goods
through market growing
innovative productsatwill
13% at current
cater exchangeemerging
to underserved rates; however, at constant
markets.
parameters
sector. he actboo combines financial
exchange rates, the growth has slowed
data, insight from EY’s global team of sector to 1%, slower than the 3% recorded in 2014.
X Introduction of eco-friendly, sustainable and naturally derived beauty products and cosmetics will stimulate
• Currency
specialists andctopinions
ations,ofand in partic
external lar a strong
experts. dollar and depreciating
demand e ro,
in established helped the market to show double-digit positive impact on overall market value.
geographies.
• While wholesale remains the dominant distribution channel for personal luxury goods (accounting for about two–thirds of market sales), the company–owned retail
channels are growing twice as fast as the wholesale channel at current exchange rates and continue to gain market share due to network expansion (with 600 new
Titles for charts
stores opened in 2015) and growth in same store sales (13% at the current exchange rate).
Industry overview
Industry overview
ld ide pe s nal l y ds a e end pc n ies 2
280–295
300 CAGR 20%
253 2%–3%
250 218 224 US 78.6
212
192 15%
200 170 167 173
153
and disclaimer
Methodology
150 13% 13% Japan 20.1
11% 10%
10%
100
+1% at
50 7% constant 5% Mainland China 17.9
% growth
rate
€b
0 Titles for charts
3% 3%
0%
-50 Italy 17.3
and specific analyses
-2%
Sample selection
-100
-5%
-150 France 17.1
-200 -8% -10%
2007 2008 2009 2010 2011 2012 2013 2014 2015E 2020E 0 20 40 60 80 100
Market size Growth €b
Source: Data based on consensus of several brokers’ reports for each
company.
Contact us
Glossary
Notes:
ltagamma
Notes:Market ain
capitalizationxis based
r oods orld ideaverage
on a one-month ar etas tof dDecember
all inter
2012. , Altagamma/Bain.
ltagamma
The 2012 ain,
growth corresponds orld idesalesx growth
to the r arrate
etsbetween
onitor, pdate, Altagamma/Bain, October 2015.
FY11A and FY12A/E.
The luxury and cosmetics financial factbook 2016Page
a e DCF and valuation
Industry
parameters
overview
G
H Global luxury
luxurygoods
goodsmarket Luxury
Title forgoods market by geography and channel
section
X Sales of industry players are expected to grow at a healthy rate, led by double-digit annual growth rate for
Welcome
y ds
to the
de third
and edition ofyEY’s
na iannual
nali y and y e i n l al pe s nal l y ds a e y c annel and a 2
L’Occitane and Natura from FY11A to FY14E.
Financial Factbook for the luxury and cosmetics
Europe Americas
sector. he actboo combines financial Japan Mainland Increased demand
X China Rest of worldthrough innovative products will cater to underserved emerging markets.
data,
15% insight from EY’s global team of sector X Introduction of eco-friendly, sustainable and naturally derived beauty products and cosmetics will stimulate
specialists and opinions of external experts.9% demand
9% in established geographies.
10%
5% 5%
5% Retail Wholesale
3%
Titles for charts 34% 66%
2015E growth
0%
0% Online
7%
-2% Off-price Airport Monobrand
Concession stores Off-price 11% stores
-5%
business 27% stores 18%
-5% 1%
18% Online
-10% 4%
-9% Department
stores
-12% Specialty 28%
-15% Retail DOS stores
51% 35%
Region Nationality
e and y na i nali y and y a ea 2 e ail and n and dis i i n c n in ed ain s a e
• As illustrated in the graph above, there is a clear dichotomy between the region of • Retail sales have grown to 34% in 2015 from 32% in 2014, gaining shares from wholesale
consumption and nationality, based on the exchange rate ct ations. sales in and in of the total personal l x r goods mar et. his re ects
Titles
• Mainland China remains the top for charts
consumer by country with one–third of the global market. a trend that companies are converting their franchised locations into company-owned stores
Japanese consumers, who used to account for about 25% of global purchases, had a 10% or joint ventures.
share of the global personal luxury goods purchases in 2015. • Monobrand stores sales (retail DOS and wholesale monobrand stores) accounts for about
• Although luxury consumers in the mature markets, such as the US, Europe and Japan, tend 29% of the overall market, while monobrand distribution across formats (including off-price
to purchase most of the products in their home market, the growth in these regions is stores, online and airport sales) already accounts for about 53% of overall distribution.
becoming increasingly dependent on tourists’ spending. • The airport channel has posted annual growth of 29%, which is attributable to the increase in
luxury spending by tourists across the world and accounts for about 6% of the global market
share in the luxury goods led largely by beauty products sales.
• The online luxury market has grown tenfold since 2005 and accounts for about 7% of total
sales in 2015. The online sales were largely led by the accessories and apparel categories.
Source: Data based on consensus of several brokers’ reports for each
company.
Notes:
ltagamma
Notes:Market ain,
capitalization x based
is r oods orld ide
on a one-month ar et
average t December
as of d all 2012.
inter ,’’ Altagamma/Bain.
ltagamma
The 2012 ain,
growth corresponds orld idesalesx growth
to the r arrate
ets onitor,
between pdate,’’ Altagamma/Bain, October 2015.
FY11A and FY12A/E.
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