DCF and valuation parameters Page 19 C Advertising expenses Advertising remains a key cost of the industry • Marketing and advertising represent a significant cost component for both global luxury and cosmetics manufacturers. • Advertising expenses will remain a major operating topic, especially for cosmetics companies focusing on top-line growth and brand awareness sustainability. s • Cosmetics advertising expenses are significantly influenced by their mass-market positioning. er aluationt • Luxury companies have a lower incidence of advertising costs; however, in addition to advertising, one should consider the additional costs/investments to promote ame ar their brands embedded in flagship stores and ambassadors. p DCF and v Selected companies — advertising expenses as a percentage of sales, FY14A/E Average 25.1% 35.0% 30.0% 29.1% 23.5% 23.9% 25.9% 25.0% 23.2% 20.0% Average 6.6% 15.0% 11.0% 11.4% 10.0% 6.7% 6.7% 9.2% 4.8% 5.0% 5.2% 6.6% 5.0% 2.7% 3.1% 0.0% h i a s o r y a t o H f y o r l c m d è e e n c n l r t d e e a a u a r m l a i o fi M o o i é d é r m o a c f t a d e t u r o T r t g n f t m S V s C s s a O C P e a a o i o e L r i E ' H v r T x h e h L L l r M u c i S a e L i e S F R B Luxury companies Cosmetics companies Source: Data based on actual or estimated numbers based on availability as of the date of this report The luxury and cosmetics financial factbook 2015