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Luxury sales growth seen sustained in 2013
Aggregated Source: Shanghai Daily: Business

GROWTH in luxury-goods spending will be sustained this year as booming demand in Southeast Asia offsets a slowdown in China and Europe, according to Bain & Co.

Worldwide luxury sales will rise 4-5 percent to as much as 222 billion euros (US$285 billion), excluding currency shifts, the consulting company estimated in a report published yesterday.

That compares with a 5 percent increase last year.

While the strength of the euro against major currencies such as the yen, the US dollar and sterling led European luxury-goods makers to post "disappointing" first-quarter revenue growth, overall "the market outlook is positive," said Claudia D'Arpizio, a Milan-based partner at Bain.

LVMH Moet Hennessy Louis Vuitton SA last month cited a decline in Japanese tourism and fewer store visitors in China for slowing sales growth, while Gucci owner PPR SA reported weaker consumption in Europe and Korea. Those patterns will continue through 2013, with bright spots being rising demand in Southeast Asia and the United States, D'Arpizio said.

The industry will expand 20 percent this year in Southeast Asia on a currency-neutral basis as destinations such as Singapore benefit from increased tourism, Bain estimates. Demand for luxury is also rising in Malaysia and Indonesia, leading companies to open stores there, the consultant said.

"We see Southeast Asia as the next engine for long-term luxury growth," D'Arpizio said.

In Europe, where spending may not increase this year, sales are stalling as Chinese travelers reduce the amount they spend because of higher prices, Bain said. And domestic consumption in the region has yet to recover, according to the report.

Charging more in Europe to close a price gap with China and other markets means luxury brands are becoming inaccessible even to the region's wealthy consumers, D'Arpizio said. Europeans are "trading down" to more affordable brands, she said.

Sales will rise about 7 percent in China, about a third of last year's rate, Bain estimates. While the so-called high-end is booming, premium brands are benefiting as a new middle class emerges and as "aspirational" shoppers grow weary of heavily logoed products, according to the report.

US consumers are rediscovering luxury and European brands "see room for growth" in North America, D'Arpizio said.

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