Page 2 Executive summary Executive summary Oelcome to the sixth edition of EY annmal financial factbooc for the lmxmrq 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 ceq financial parameters. In 2015, the luxury goods industry experienced 13% growth at current exchange rates, reaching Ò*-+b3 hooener, cmrrencq Ömctmations oere the main contribmtor of this grooth, 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. Eanq factors contribmte to the state of the marcet. ?inen the significant impact that the Roberto Bonacina Marco Pier Mazzucchelli socioeconomic and political climate can have on a global scale, it would be remiss not 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 marcets, as oell as other intangible elements, are contribmting [email protected] [email protected] 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 anq consmmer, none more so than ohen a significant spend is reimired, smch 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.“ @oo shomld lmxmrq plaqers act to anoid losing their consmmers7 Oomld a imicc reaction smffice, or do brands need to renieo their entire bmsiness model7 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 2016