Challenging Growth in The Luxury and Cosmetics Sector

Challenging growth in the luxury
and cosmetics sector

The luxury and cosmetics
financial factbook
2014 edition
2013 has been a challenging year for the luxury

industry, perhaps the most challenging since the
recession of 2009, and we see this on the impact
on the overall industry growth rate.
Paul Wood
Partner, Advisory
Contents
2 Executive summary
Statistics and key facts
Index evolution
6 DCF and valuation parameters

A. Financial parameters
B. Operating aggregates
C. A
dvertising expenses and net working
capital analyses
D. SOTP and segment analyses
E. Trading multiples
F. Transaction multiples
32 Industry overview
A. Global luxury goods market
B. Global cosmetic goods market
44 Methodology
Approach
SOTP analyses
Sample selection
Focus on Moncler, Coty, Tumi, Hengdeli and
Chow Tai Fook
54 Glossary
55 Contact us
Page 2
Executive summary
Welcome to the fourth edition of EYs annual financial factbook for the
luxury and cosmetics sector, which focuses on the current industry trends,
the evolution of the operating aggregates and the key financial parameters.
The factbook combines publicly available data with input from our sector
leaders based on our experience working with many of the leading luxury
and cosmetics companies in the world.
Paul Wood
Partner, Advisory Paris
EMEIA and Global Coordinator
paul.wood@fr.ey.com
Andrea Guerzoni
Partner, Transaction Support Milan
EMEIA TAS Leader
andrea.guerzoni@it.ey.com
2013 has been a challenging year for the luxury industry, perhaps the
most challenging since the recession of 2009, and we see this on the
impact on the overall industry growth rate. For the first time in three
years, the industry growth rate has slowed to single digits at 2.4%*
(10.4% FY12) giving a personal luxury market worth an estimated
217b. This smaller but still positive growth is mainly led by the US and
Chinese consumption (all over the world) and is supported by the resilient
accessories segment and the progression of the online channel. Looking to
the future, however, we still see positive annual growth rates in the range
of 4% to 6% through FY16. We believe that this positive future growth will
be driven by longer-term urbanization, a reduced drag on the wholesale
market and an increasing shift toward younger, male customers. If overall
growth rates have declined, profitability in the sector has been maintained
on average 1% less than last year, and this is largely due to volume growth,
a high retail mix (with higher margins) and a declaration by many players
of an increased focus on efficiency.
The cosmetics market shows a smaller decline in growth rates in 2013
(3.8%) and remains a solid market at 175b. The longer-term outlook
also remains positive as the world population with access to cosmetics
in emerging markets is estimated to increase by 50%. As a result, the
beauty industry is expected to double in the next 10 to 15 years with
China, the US, Brazil, India and Japan forecast to become the top markets
*Includes currency effect
The luxury and cosmetics financial factbook 2014
(only Europe is missing). By 2020, it is estimated that more than half of

consumers will be in tropical zones, with hot and humid climates, and
over 60% of the worlds population will be living in major urban areas
affected by pollution, so the demand for high-quality cosmetics will
never be higher.
What are the key areas of focus that executives in the industry should
focus on over the next year?
Develop a clearer strategy for the future Chinese market Long seen as
the panacea for easy growth, the market for China business, both domestic
and tourist, is under pressure. Domestically, we saw the new president make
pronouncements against corruption and gift giving, and higher pricing
due to luxury sales taxes has had a slowdown effect on the domestic China
market for luxury. Many luxury houses invested heavily over the last 5 to 10
years to expand their retail estate into second- and third-tier cities and are
now seeing a reduction in demand in these markets. In some areas, some
of these stores are simply showcases for the Chinese customer to explore
before their overseas shopping trips. Amid a lack of brand loyalty, a desire
for higher-end and more unique products, and an increasing demand for
a digital channel, the right mix of wholesale, retail and online for the China
market is no longer clear. However, we believe adjusting or developing the
right strategy to win in China is essential for the future.
Why?
In 2013, Chinese customers accounted for approximately one-third of
the global spend on luxury. The Chinese middle class is evolving, with
more higher-income households likely to fuel growth in the teens in luxury
demand. By 2020, Chinese customers are expected to add up to 40% to
luxury growth.
Page 3
Executive summary
Executive summary
Focus on efficiency While many large and small luxury houses deftly manage their
increased retail footprint, this is not always the case across the back office. The core
skills, such as brand image and management, merchandising, range and assortment
planning design and manufacture have to be in order to compete in todays world
of challenging growth. However, many houses, including the international groups, are
somewhat artisanal in how they organize and deliver what are considered non-core or
support functions such as finance, procurement, logistics, HR and IT. Relatively simple
things for other industries such as leveraging enterprise resource planning, using
big data and analytics to enhance decision-making, and structuring decentralized or
centralized organizations are often lacking when benchmarked against other sectors
and are leading to increasing pressures on margins.
Why?
This pressure is being compounded by increasing competition from mass prestige
pushing up into the luxury market. Houses are now turning their attention to becoming
as efficient and effective as possible. Upwards of 30% can be taken out of SG&A costs by
having leaner processes, better decision-making tools and more appropriately structured
support functions.
While this may seem small compared to some of the EBITDA delivered due to high margins
and volume-based growth, luxury houses should and are now starting to take
the efficiency of their support functions more seriously.
Accelerate your digital presence E-commerce strategies are not new to the sector,
but we have seen that the luxury houses have lagged behind other industries in
developing clear and concrete plans for capitalizing on the digital opportunity.
Historically, a luxury customer has typically been a middle-aged, high-net-worth
individual, and the intangible rarity associated with luxury products seemed to be at odds
with the fast, young, 24/7 world of the digital economy. However, the average age of the
luxury consumer is falling, largely due to the China and Asian market, and the emergence
of e-tailers, particularly in the US fashion market, is starting to challenge the traditional
luxury world. The need for a consistent digital strategy has never been more pressing.
Why?
Online penetration is growing at a rapid pace. While only 4.5% of sales, it is growing
at a massive 30% year-on-year growth. Sixty percent of the online luxury market is in
the US, despite all the hype about Chinese teenagers, with accessories having the highest
penetration to date. M-commerce currently represents one-third of all traffic and up to
10% of sales for some brands.
This edition of the factbook, based on your feedback, has been focused to deliver
operational and financial aggregates about the industry, along with key valuation
parameters and multiples. We hope that this report proves to be insightful and provokes
constructive thought and discussion within your organization.
Paul Wood
paul.wood@fr.ey.com
Andrea Guerzoni
Page 4
Statistics and key facts
Global personal
luxury market
2.4%
grew by
in 2013.
The US market
has shown
sustainable signs
of recovery,
while the
Chinese market
is expected to
maintain lowdigit growth.
Online sales
30%
reached
year-on-year
growth in real
terms.
US demand
(+7%) surpassed
Asia as luxurys
main growth
engine in
2013.
Currency
fluctuations still
impact luxury
purchasing
patterns
(Japanese yen,
Russian ruble,
Indonesian
rupiah and
Brazilian real).
The global
cosmetics
market grew
3.8%
by
in 2013.
China, Brazil
and the US
contributed to
almost half
of the global
cosmetics
market
in 2013.
New markets in
Asia-Pacific and
Latin America
represented
80% of
the global
cosmetics
market growth.
Mass-market
sales tailed off,
particularly in
US and
Asia.
the
For both the

luxury
and
cosmetics
industries,
digital is
proving to be a
game-changer,
increasing
engagement
with consumers
The Urban
middle class
could drive
cosmetics
market
growth
over the next
50%
20 years
Younger
premium
consumers
from emerging
economies
and the US are
driving demand
Index evolution
The analysis reported in the graph below shows that the EY luxury and cosmetics index (represented by the
companies we included in the EY factbook) has outperformed the market over the last six years with a total
return of 63%, corresponding to an average yearly significant return of 7.7%, despite the economic downturn.
This relative performance actually illustrates the appetite of investors for an industry that has demonstrated
solid financial fundamentals in terms of sales growth, major profitability, international client base and
exposure to emerging markets, attributing higher valuations to companies-related securities.
The EY index is a representation of those luxury and cosmetics companies analyzed within the factbook.
A specific weight has been attributed to each company included 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 at every company inclusion after its IPO. Finally, the evolution of the EY index has been
compared to these of the S&P 500 and STOXX Europe 600 indexes using 1 January 2008 as a starting date
(rebased to 100).
EY luxury and cosmetics index evolution compared to major indices (base 100 as of 1 January 2008)
200
As of 31 J ul 2014
180
163.0
16 0
140
133.0
120
100
92.2
80
6 0
40
20
0
J an- 08
Apr- 08
J ul- 08
Oct- 08
J an- 09
Apr- 09
J ul- 09
Oct- 09
J an- 10
Apr- 10
J ul- 10
Oct- 10
J an- 11
EY index
Apr- 11
J ul- 11
STOX X
Oct- 11
J an- 12
Apr- 12
J ul- 12
Oct- 12
J an- 13
Apr- 13
J ul- 13
Oct- 13
J an- 14
Apr- 14
J ul- 14
S& P
Source: Capital IQ
Executive summary
Page 5
PAGE 6
OPENING
Positive future growth will be driven by

longer-term urbanization, a reduced drag on
the wholesale market and an increasing shift
toward younger, male customers.
Paul Wood
Partner, Advisory
DCF and valuation parameters

LUXURY AND COSMETICS THE EY FINANCIAL FACTBOOK 2014
Page 7
Operating aggregates
Advertising expenses and net working

capital analyses
SOTP and segment analyses
Trading multiples
Transaction multiples
Industry overview
Financial parameters
Executive summary
DCF and valuation

parameters
Opening
Methodology
and disclaimer
Sample selection
and specific analyses
Glossary
Contact us
Page 8
Luxury companies continue to reflect high-potential growth

combined with a limited risk profile
WACC ranges from 7.6% (Luxottica) to 10.5% (Ralph Lauren, Chow Tai Fook), depending on the companies
risk profile perception, with an overall limited variance.
There is a wider range in long-term growth rates (1% to 4.8%), mainly depending on geographical presence,
size and product diversification.
WACC and LTGR by company
Luxury
companies
12.0
11.5
11.0
Chow Tai Fook
R alph Lauren
10.5
Salvatore
Ferragamo Swatch
WACC ( %)
10.0
Hengdeli
Kering
Burb erry
Brunello
Hugo
Cucinelli
Boss Coach Tod s
R ichemont
LVMH
Tif f any
Herms
Prada
Michael Kors
Safilo
Moncler
9 .5
9 .0
8.5
8.0
Luxottica
7.5
7.0
0.0%
1.0%
2.0%
3.0%
4.0%
5 .0%
LTGR
Note: Bubble size reflects market capitalization. Dotted lines represent average values.
Source:
WACC and LTGR: based on consensus of several brokers reports for
each company
Market capitalization and beta: EY elaboration based on S&P Capital IQ
Gearing: companies financial statements
Notes:
Market capitalization is based on a one-month average as of 31 March 2014.

Gearing is defined as net financial debt/enterprise value.
Beta correspond to levered beta measured on a weekly basis over a two-year period.
Beta figure for Moncler might be influenced by an insufficient number of
observations on the considered period.
Companies are sorted in

decreasing order based on the
market capitalization in euros
observed as of 31 March 2014
(one-month average).
LVMH
Richemont
Herms
Swatch
Luxottica
Kering
Michael Kors
Prada
Chow Tai Fook
Ralph Lauren
Coach
Tiffany
Burberry
Hugo Boss
Salvatore Ferragamo
Moncler
Tods
Brunello Cucinelli
Tumi
Safilo
Hengdeli
Average
Median
Maximum
Minimum
Market
capitalization
(in m)
65,304
39,688
24,528
23,706
18,865
18,000
14,293
13,657
12,268
10,451
9,914
8,422
7,691
6,540
3,657
3,217
2,908
1,333
1,139
964
679
WACC
Gearing
9.0%
9.0%
8.3%
9.3%
7.6%
9.6%
8.7%
8.7%
10.5%
10.5%
9.2%
8.6%
9.5%
9.2%
9.5%
8.3%
9.2%
8.9%
10.4%
8.4%
9.8%
9.1%
9.2%
10.5%
7.6%
7.8%
(15.9%)
(4.1%)
(4.1%)
7.5%
16.1%
(4.4%)
(2.0%)
1.8%
(8.4%)
(6.2%)
7.5%
(3.4%)
1.1%
1.1%
5.2%
(6.3%)
1.2%
(1.9%)
18.3%
21.6%
1.6%
1.1%
21.6%
(15.9%)
Beta
1.01
1.21
0.72
1.08
0.50
0.96
1.21
0.83
1.17
1.26
1.06
1.17
1.01
0.59
0.66
1.01
0.67
0.62
1.64
0.72
1.12
0.96
1.01
1.64
0.50
LTGR
2.3%
3.1%
3.6%
3.1%
3.1%
2.6%
4.5%
2.7%
3.6%
1.0%
2.7%
3.2%
3.3%
2.5%
3.1%
3.2%
2.9%
4.8%
n.a.
2.0%
3.7%
3.0%
3.1%
4.8%
1.0%
Page 9
The cosmetics sample is characterized by a smaller number of

companies, which significantly impacts the average value of
financial parameters
Naturas (Brazil) long-term growth rate is significantly higher than the average sample, driven by its
DCF and valuation
parameters
geographical coverage.
WACC sample levels are balanced by the two extremes of Natura (Brazil geographical risk) and
Shiseido (Japan).
WACC and long-term growth rate (LTGR) by company

14.0
Cosmetics
companies
13.0
12.0
Natura
11.0
10.0
WACC (%)
9.0
Coty
7.0
Beiersdorf
6.0
WACC
Gearing
Beta
LTGR
LOral
69,368
8.2%
(1.8%)
0.67
3.0%
LOral
Este Lauder
19,355
7.9%
(0.6%)
1.14
2.7%
Beiersdorf
15,908
7.6%
(8.7%)
0.69
2.1%
Este Lauder
Natura
4,985
10.4%
10.8%
0.64
4.8%
LOccitane
8.0
Market
capitalization
(in m)
5.0
4.0
Shiseido
5,161
6.1%
15.2%
0.75
n.a.
3.0
Coty
4,226
8.2%
23.7%
1.08
2.0%
LOccitane
2,483
8.7%
(8.7%)
0.65
2.3%
2.0
1.0
0.0
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
LTGR
Note: Bubble size reflects market capitalization. Dotted lines represent average values.
Companies are sorted in

decreasing order based on the
market capitalization in euros
observed as of 31 March 2014
(one-month average).
Average
8.2%
4.3%
0.80
2.8%
Median
8.2%
(0.6%)
0.69
2.5%
Maximum
10.4%
23.7%
1.14
4.8%
Minimum
6.1%
(8.7%)
0.64
2.0%
Sources:
WACC and LTGR: based on consensus of several brokers reports for
each company
Market capitalization and beta: EY elaboration based on S&P Capital IQ
Gearing: companies financial statements
Notes:

Gearing is defined as net financial debt/enterprise value.
Beta correspond to levered beta measured on a weekly basis over a
two-year period.
Page 10
EY luxury and cosmetics sample:

summary of financial parameters
WACC (in %)
Beta
Gearing (in %)
Luxottica
Beiersdorf
LTGR (in %)
0.5 9
Beiersdorf
( 8.7)
Safilo
2.0%
Coty
2.0%
Hugo Boss
7.6 %
Brunello Cucinelli
0.6 2
L' Occitane
( 8.7)
Natura
0.6 4
R alph Lauren
( 8.4)
8.2%
L' Occitane
0.6 5
Tod' s
( 6 .3)
Coty
8.2%
Salvatore Ferragamo
0.6 6
Coach
( 6 .2)
Herms
8.3%
Tod' s
0.6 7
Michael Kors
( 4.4)
Moncler
8.3%
L' Or al
0.6 7
Swatch
( 4.1)
Safilo
8.4%
0.6 9
Herms
( 4.1)
Burb erry
( 3.4)
Beiersdorf
8.6 %
2.1%
L' Occitane
2.3%
LVMH
2.3%
Hugo Boss
2.5 %
Kering
2.6 %
Coach
2.7%
2.7%
( 1.9 )
Prada
2.7%
L' Or al
( 1.8)
Tod' s
2.9 %
( 2.0)
Tumi
0.75
Shiseido
Beiersdorf
Est e Lauder
Prada
0.72
Herms
8.7%
Prada
0.72
Safilo
8.7%
Michael Kors
1.0%
( 15 .9 )
L' Or al
Tif f any
R alph Lauren
R ichemont
7.6 %
7.9 %
Est e Lauder
0.5 0
Luxottica
6 .1%
Shiseido
L' Occitane
8.7%
Prada
Brunello Cucinelli
8.9 %
Average
0.9 2
Est e Lauder
( 0.6 )
Average
3.0%
Average
8.9 %
Kering
0.9 6
Hugo Boss
1.1
L' Or al
3.0%
LVMH
9 .0%
LVMH
1.01
Salvatore Ferragamo
1.1
R ichemont
3.1%
R ichemont
9 .0%
Burb erry
1.01
Brunello Cucinelli
1.2
Hugo Boss
9 .2%
Moncler
1.01
Tod' s
9 .2%
Coach
1.06
Average
Coach
9 .2%
Swatch
1.08
Moncler
Swatch
9 .3%
Coty
1.08
Tif f any
7.5
Burb erry
9 .5 %
Hengdeli
1.12
Luxottica
7.5
Salvatore Ferragamo
9 .5 %
Est e Lauder
1.14
LVMH
Kering
9 .6 %
1.17
Natura
Hengdeli
9 .8%
1.17
Shiseido
Tumi
10.4%
Natura
10.5 %
Chow Tai Fook

WACC
Chow Tai Fook

Tif f any
Michael Kors
10.4%
R alph Lauren
R ichemont
R alph Lauren
10.5 %
Industry benchmark
High
1.21
Safilo
1.26
Hengdeli
Industry benchmark
2.2
5 .2
High
3.1%
3.1%
Salvatore Ferragamo
3.1%
Moncler
3.2%
Tif f any
3.2%
Burb erry
7.8
21.6
Industry benchmark
4.5 %
Brunello Cucinelli
4.8%
Natura
4.8%
23.7
LTGR
High
3.7%
Michael Kors
18.3
2.2%
3.6 %
Hengdeli
16 .1
Low
3.6 %
Herms
15 .2
Coty
3.3%
Chow Tai Fook
10.8
Gearing
0.92
Low
Source: Data based on consensus of several brokers reports for each company.
Note: LTGR data was not available for Tumi and Shiseido.
1.21
Kering
Swatch
Luxottica
1.8
Chow Tai Fook
1.6 4
Tumi
Beta
8.9%
Low
0.83
3.0%
Low
Industry benchmark
High
Sales of the luxury companies sample are expected to grow an

average of 10% annually over the next three years
Expected growth will mainly be driven by:

Continued strengthening of US economy, resulting in strong domestic demand
Longer-term urbanization and the shift toward younger and more male consumers
The waning drag on the wholesale segment
Michael Kors, Chow Tai Fook, Moncler and Tumi

notably outperformed average growth levels.
DCF and valuation

parameters
Page 11
Sales CAGR, FY12AFY15E luxury companies

Michael Kors
32.7%
Chow Tai Fook
18.9 %
Moncler
17.0%
Tumi
16 .6 %
Brunello Cucinelli
13.6 %
Burb erry
12.1%
Hengdeli
10.8%
Average
10.1%
Herms
9 .9 %
Prada
8.8%
Salvatore Ferragamo
8.6 %
8.5 %
Swatch
Tif f any
7.4%
R ichemont
7.4%
Ralph Lauren
7.3%
Hugo Boss
7.2%
6 .2%
LVMH
5 .5 %
Luxottica
Kering
Tod s
Safilo
Coach
4.6 %
4.1%
3.4%
2.2%
Source: Data based on consensus of several brokers reports for

each company.
Sales (in m)
Michael Kors
Chow Tai Fook
Moncler
Tumi
Brunello Cucinelli
Burberry
Hengdeli
Herms
Prada
Salvatore Ferragamo
Swatch
Tiffany
Richemont
Ralph Lauren
Hugo Boss
LVMH
Luxottica
*Kering sales for FY12A-FY15E
Kering*
exclude numbers for Groupe Fnac,
Tods
Redcats, Conforama and CFAO.
Safilo
Notes:
Coach
2013 figures are estimated or actual
Average
depending on their availability as of
the date of this study.
Median
Figures are converted into euros
Maximum
using exchange rates as of 31 March
Minimum
2014. (Source: Capital IQ)
FY12A
FY13A/E
FY14E
FY15E
1,812
5,374
489
289
280
2,418
1,415
3,484
3,297
1,155
6,401
2,754
10,150
5,040
2,346
28,103
7,086
9,736
985
1,199
3,457
2,418
7,094
581
339
323
2,817
1,561
3,755
3,587
1,256
6,943
2,926
10,645
5,328
2,432
29,149
7,313
9,748
983
1,122
3,683
2,987
7,924
677
394
364
3,073
1,743
4,178
3,821
1,354
7,535
3,160
11,529
5,731
2,665
31,155
7,727
10,336
1,028
1,246
3,544
4,237
9,029
783
458
410
3,404
1,927
4,625
4,245
1,478
8,173
3,414
12,569
6,235
2,890
33,626
8,322
11,129
1,112
1,327
3,686
CAGR
(FY12A-FY15E)
32.7%
18.9%
17.0%
16.6%
13.6%
12.1%
10.8%
9.9%
8.8%
8.6%
8.5%
7.4%
7.4%
7.3%
7.2%
6.2%
5.5%
4.6%
4.1%
3.4%
2.2%
10.1%
8.5%
32.7%
2.2%
Page 12
Sales growth expectations for cosmetics players are lower than

for the luxury segment but still show an average annual growth
of 5% over the FY12A-FY15E period
Majority of players are expected to grow at lower single digits, except for Natura and LOccitane.
The rising middle classs increased consumer spending, particularly in emerging markets, is likely to
Natura and LOccitane significantly

outperformed the cosmetics sample
expectations.
drive demand.
Innovation and emphasis on quality and new ideas have boosted the cosmetics market.
Sales CAGR, FY12AFY15E cosmetic companies

Natura
9 .7%
L Occitane
Est e Lauder
5 .6 %
Average
5 .4%
Shiseido
4.7%
Beiersdorf
4.1%
L Or al
Coty
Sales (in m)
9 .4%
3.3%
1.0%
FY13A/E
FY14E
FY15E
Natura
1,530
1,691
1,838
2,021
LOccitane
1,043
1,079
1,224
1,367
9.4%
Este Lauder
7,050
7,389
7,817
8,291
5.6%

each company.
Figures for 2013 are estimated or

actual depending on their availability
as of the date of this study.
Figures are converted into euros
using exchange rates as of 31 March
2014. (Source: Capital IQ)
9.7%
Shiseido
4,792
5,196
5,361
5,495
4.7%
Beiersdorf
6,040
6,141
6,421
6,816
4.1%
22,463
22,977
23,397
24,738
3.3%
3,347
3,374
3,335
3,404
1.0%
LOral
Notes:
CAGR
(FY12A-FY15E)
FY12A
Coty
Average
5.4%
Median
4.7%
Maximum
9.7%
Minimum
1.0%
The luxury sample confirmed last years healthy EBITDA

of 23.7%, with further marginal growth expected
Most of the companies are expected to slightly improve their operating margin in the coming years,
EBITDA remains largely above 20% with some

notable exceptions higher than 30%.
driven by:
DCF and valuation

parameters
Page 13
Volume growth (which implies higher SG&A leverage)

Higher proportion of retail in the sales mix leading to higher margins
Refocusing on efficiencies (declared by most of players)
Average EBITDA margin, FY12FY15E luxury companies

Herms
Moncler
32.9 %
Prada
32.2%
Michael Kors
31.9 %
Coach
31.9 %
Swatch
29 .5 %
Richemont
27.9 %
Burberry
25 .9 %
Tod s
25 .1%
LVMH
25 .0%
Tiffany
24.6 %
Average
24.0%
Hugo Boss
23.3%
Tumi
22.0%
Kering
21.6 %
Salvatore Ferragamo
21.4%
Ralph Lauren
20.2%
Luxottica
20.0%
Brunello Cucinelli
Chow Tai Fook
Safilo
Hengdeli
EBITDA margin
35 .6 %
17.9 %
13.6 %
11.1%
10.0%

each company.
*Kering margin for FY12AFY15E excludes numbers for

Fnac, Redcats, Conforama
and CFAO.
Note: The 2013 EBITDA margin is
computed on the basis of either
actual or estimated figures for 2013
sales, depending on their availability.
As some groups are listed under
different jurisdictions around the
world, they may use different GAAP,
and therefore a direct comparison
of EBITDA may be less meaningful
than if their results were presented
under the International Accounting
Standards.
Herms
Moncler
Prada
Michael Kors
Coach
Swatch
Richemont
Burberry
Tods
LVMH
Tiffany
Hugo Boss
Tumi
Kering*
Salvatore Ferragamo
Ralph Lauren
Luxottica
Brunello Cucinelli
Chow Tai Fook
Safilo
Hengdeli
Average
Median
Maximum
Minimum
FY12A
FY13A/E
FY14E
FY15E
Average ratio
(FY12A-FY15E)
35.5%
33.0%
31.9%
31.4%
34.5%
28.7%
27.7%
27.6%
25.4%
24.7%
22.7%
22.3%
20.9%
21.2%
19.8%
19.7%
18.7%
15.7%
13.2%
9.9%
12.6%
23.7%
22.7%
35.5%
9.9%
36.0%
33.0%
31.9%
32.3%
33.2%
31.0%
27.2%
25.7%
24.0%
24.5%
23.9%
23.1%
21.5%
21.0%
20.9%
19.2%
19.5%
18.6%
13.2%
10.0%
8.0%
23.7%
23.9%
36.0%
8.0%
35.4%
32.6%
32.3%
31.9%
29.9%
28.7%
28.1%
25.4%
25.3%
25.2%
25.4%
23.6%
22.7%
21.7%
22.0%
20.4%
20.5%
18.4%
13.7%
11.8%
9.6%
24.0%
25.2%
35.4%
9.6%
35.7%
32.9%
32.7%
32.2%
29.8%
29.5%
28.5%
24.9%
25.8%
25.5%
26.2%
24.3%
22.8%
22.5%
23.1%
21.4%
21.2%
18.8%
14.0%
12.9%
9.8%
24.5%
24.9%
35.7%
9.8%
35.6%
32.9%
32.2%
31.9%
31.9%
29.5%
27.9%
25.9%
25.1%
25.0%
24.6%
23.3%
22.0%
21.6%
21.4%
20.2%
20.0%
17.9%
13.6%
11.1%
10.0%
24.0%
24.6%
35.6%
10.0%
Page 14
Cosmetic companies show a solid average EBITDA of 17% that is

expected to grow, although at slightly lower rates than those for
luxury companies
Like luxury companies, most cosmetic companies are expected to improve their operating margin in the
Notwithstanding its recent significant

growth, Natura still outperforms the samples
profitability
coming years.
The key drivers of margin growth are:

Operational efficiencies
Consumers aspiring to increasingly high levels of quality
Average EBITDA margin, FY12AFY15E cosmetics companies

Natura
23.1%
L Or al
Est e Lauder
18.7%
L Occitane
17.9 %
Average
17.4%
Coty
15 .8%
Beiersdorf
Shiseido
15 .7%
10.2%

each company.
FY12A
FY13A/E
FY14E
FY15E
Average ratio
(FY12A-FY15E)
Natura
23.6%
22.7%
23.0%
23.1%
23.1%
EBITDA margin
20.7%
Note: The 2013 EBITDA margin is

computed on the basis of either
actual or estimated figures for 2013
sales, depending on their availability.
As some groups are listed under
different jurisdictions around the
world, they may use different GAAP,
and therefore a direct comparison
of EBITDA may be less meaningful
than if their results were presented
under the International Accounting
Standards.
LOral
20.2%
20.8%
20.7%
21.1%
20.7%
Este Lauder
17.4%
18.6%
19.1%
19.7%
18.7%
LOccitane
19.3%
16.3%
17.8%
18.2%
17.9%
Coty
13.7%
14.5%
17.3%
17.7%
15.8%
Beiersdorf
14.7%
15.0%
16.3%
16.8%
15.7%
Shiseido
9.4%
10.2%
10.6%
10.8%
10.2%
Average
16.9%
16.9%
17.8%
18.2%
17.4%
Median
17.4%
16.3%
17.8%
18.2%
17.9%
Maximum
23.6%
22.7%
23.0%
23.1%
23.1%
Minimum
9.4%
10.2%
10.6%
10.8%
10.2%
Page 15
Capex sales ratios for the luxury industry ranges from 5% to 6%,
based on historical and estimated figures
Prada by far outperforms sample capex ratio due to its recent strong focus on retail business, mainly
DCF and valuation
parameters
carried out in 2012 and 2013 following its listing on the Hong-Kong Stock Exchange.
Average capex ratio, FY12AFY15E luxury companies

10.4%
Prada
8.2%
Burb erry
7.1%
Michael Kors
6 .6 %
R ichemont
6 .4%
Hugo Boss
6 .2%
Herms
6 .0%
Swatch
5 .8%
LVMH
5 .6 %
Average
5 .5 %
Salvatore Ferragamo
Kering
5 .2%
Moncler
5 .2%
Tif f any
5 .2%
Tod' s
5 .1%
Coach
5 .1%
R alph Lauren
5 .1%
TU MI
5 .0%
Luxottica
4.9 %
Safilo
Hengdeli
Chow Tai Fook
Capex ratio
8.2%
Brunello Cucinelli
2.7%
1.8%
1.4%

each company.
Note: The 2013 capex ratio is

computed based on either actual or
estimated figures for 2013 sales,
depending on their availability.
Prada
Brunello Cucinelli
Burberry
Michael Kors
Richemont
Hugo Boss
Herms
Swatch
LVMH
Salvatore Ferragamo
Kering
Moncler
Tiffany
Tods
Coach
Ralph Lauren
Tumi
Luxottica
Safilo
Hengdeli
Chow Tai Fook
Average
Median
Maximum
Minimum
FY12A
FY13A/E
FY14E
FY15E
Average ratio
(FY12A-FY15E)
10.1%
9.1%
8.8%
6.0%
5.9%
7.0%
7.5%
6.0%
6.1%
5.1%
4.5%
5.4%
5.5%
4.8%
3.9%
4.0%
5.2%
5.3%
2.2%
3.7%
2.0%
5.6%
5.4%
10.1%
2.0%
15.3%
9.3%
8.4%
8.1%
7.2%
7.1%
5.6%
6.6%
5.7%
6.5%
6.8%
5.8%
5.1%
5.0%
4.8%
5.5%
5.3%
5.1%
2.5%
0.9%
1.5%
6.1%
5.7%
15.3%
0.9%
8.2%
8.6%
8.0%
7.2%
7.0%
5.8%
5.9%
5.7%
5.7%
5.3%
4.8%
4.7%
5.2%
5.8%
5.7%
6.1%
5.2%
4.9%
3.1%
1.4%
1.1%
5.5%
5.7%
8.6%
1.1%
7.8%
5.7%
7.6%
N/A
6.1%
5.5%
5.6%
5.7%
5.5%
5.0%
4.8%
5.0%
5.0%
4.9%
6.0%
4.8%
4.2%
4.6%
3.2%
1.2%
0.9%
5.0%
5.0%
7.8%
0.9%
10.4%
8.2%
8.2%
7.1%
6.6%
6.4%
6.2%
6.0%
5.8%
5.5%
5.2%
5.2%
5.2%
5.1%
5.1%
5.1%
5.0%
4.9%
2.7%
1.8%
1.4%
5.6%
5.2%
10.4%
1.4%
Page 16
Overall the cosmetics industrys capex ranges from 4.5% to 5%

which has been elevated by those with retail networks
LOccitane and Natura capex ratios outperform the sample due to their retail profiles.
Average capex ratio, FY12AFY15E cosmetics companies

L Occitane
6 .6 %
Natura
Capex ratio
6 .4%
Average
4.7%
FY12A
FY13A/E
FY14E
FY15E
Average ratio
(FY12A-FY15E)
Est e Lauder
4.5 %
LOccitane
8.9%
7.4%
5.4%
4.8%
6.6%
L Or al
4.5 %
Natura
6.8%
7.6%
6.1%
5.1%
6.4%
Coty
4.1%
Shiseido
Beiersdorf
3.8%
2.8%
Note: The 2013 capex ratio is

computed based on either actual or
estimated figures for 2013 sales,
depending on their availability.

each company.
Este Lauder
4.3%
4.5%
4.6%
4.6%
4.5%
LOral
4.2%
4.6%
4.9%
4.2%
4.5%
Coty
3.8%
3.6%
5.1%
4.0%
4.1%
Shiseido
2.6%
4.4%
4.2%
4.1%
3.8%
Beiersdorf
2.5%
3.5%
2.7%
2.6%
2.8%
Average
4.7%
5.1%
4.7%
4.2%
4.7%
Median
4.2%
4.5%
4.9%
4.2%
4.5%
Maximum
8.9%
7.6%
6.1%
5.1%
6.6%
Minimum
2.5%
3.5%
2.7%
2.6%
2.8%

summary of operating aggregates
Average sales CAGR, FY12AFY15E
Average EBITDA margin, FY12AFY15E
Michael Kors
Herm s
32.7%
Chow Tai Fook

Tumi
Prada
16.6%
Michael Kors
31.9%
Coach
31.9%
10.4%
8.2%
Burberry
8.2%
Michael Kors
29.5%
Richemont
10.8%
Hengdeli
Prada
Brunello Cucinelli
32.2%
Swatch
12.1%
Burberry
32.9%
17.0%
13.6%
Brunello Cucinelli
35.6%
Moncler
18.9%
Moncler
Average capex ratio, FY12AFY15E
27.9%
7.1%
L' Occitane
6.6%
Richemont
6.6%
Natura
6.4%
Hugo Boss
6.4%
Herm s
9.9%
Burberry
Natura
9.7%
Tod' s
25.1%
Herm s
6.2%
9.4%
LVMH
25.0%
Swatch
6.0%
L' Occitane
Prada
8.8%
Salvatore Ferragamo
8.6%
Swatch
7.4%
Richemont
7.4%
Ralph Lauren
7.3%
Hugo Boss
Est e Lauder
5.6%
Luxottica
5.5%
Shiseido
4.7%
Kering
4.6%
Tod' s
4.1%
Beiersdorf
4.1%
afilo
3.4%
L' Or al
3.3%
Coty
Sales CAGR
5.3%
5.2%
Tumi
22.0%
Moncler
5.2%
Kering
21.6%
Tiffany
5.2%
21.4%
L' Or al
20.7%
20.2%
Ralph Lauren
5.1%
20.0%
Tumi
5.0%
Est e Lauder
18.7%
L' Occitane
Brunello Cucinelli
Coty
Luxottica
17.9%
Est e Lauder
17.9%
L' Or al
15.8%
Beiersdorf
Hengdeli
10.0%
Industry benchmark
High
2.8%
afilo
2.7%
Hengdeli
Chow Tai Fook
Capex ratio
22.3%
Low
3.8%
Beiersdorf
11.1%
10.2%
4.5%
4.1%
Shiseido
13.6%
Shiseido
4.9%
4.5%
Coty
15.7%
Chow Tai Fook
EBITDA margin
Industry benchmark
5.1%
5.1%
Luxottica
2.2%
High
Tod' s
Coach
Ralph Lauren
1.0%
Low
23.1%
5.8%
5.5%
Kering
afilo
8.9%
Salvatore Ferragamo
Average
Salvatore Ferragamo
6.2%
23.3%
22.3%
Natura
Average
7.2%
LVMH
Coach
Hugo Boss
8.5%
Tiffany
LVMH
24.6%
Tiffany
8.9%
Average
25.9%
1.8%
1.4%
5.3%
Low
Industry benchmark
High
DCF and valuation

parameters
Page 17
Page 18
Advertising expenses and

net working capital analysis
Advertising remains a key driver 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 companies focusing on top-line
growth and brand awareness sustainability.
Cosmetics advertising expenses are significantly influenced by their mass-market positioning.

Luxury companies, in addition to advertising, promote their brands via flagship stores and ambassadors.
Selected companies advertising expenses as a % of sales, FY13A/E

35 .0%
30.0%
30.0%
27.5 %
25 .0%
23.0% 23.1%
24.3%
in %
20.0%
15 .0%
Luxury companies
Cosmetics companies
L Oral
Este Lauder
Beiersdorf
Coty
Shiseido
9 .3%
LVMH
Safilo
R ichemont
6 .2%
Luxottica
Tumi
6 .2%
Salvatore
Ferragamo
Coach
5 .7%
Moncler
2.5 %
5 .6 %
Tif f any
2.0%
Prada
4.8%
5 .0%
6 .6 %
Herms
10.0%
0.0%
11.4%
L Occitane
10.7%
9 .0%
Page 19
Net working capital requirements for jewelry and watches

companies are higher than for other luxury companies

As shown in the graph below, the jewelry and watches business is the most working-capital-intensive of all
DCF and valuation
parameters
luxury segments.
Net work ing capital as a % of sales ( %)
Hard luxuries (watches and jewelry) rely heavily on wholesale channels.
80%
6 0%
2015
2015
2012
2012
40%
2012
2015
2015
2012
20%
2015
2012
2015
2012
2015
2015
2012
2012
2015
2012
2014
2012
0%
- 20%
Swatch
Tif f any
Chow Tai
Fook
Hengdeli
R ichemont
Tod s
Safilo
Brunello
Cucinelli
LVMH
Michael
Kors
2015
2015
2012
2012
Salvatore Hugo Boss

Ferragamo
2015
2012
TU MI
2015
2012
R alph
Lauren
2015
2012
2012
Moncler
2015
2015
2012
Herms
Prada
2012 2015 2012 2015
Burb erry
Coach
2012 2015
Luxottica
2012
2015
Kering
Notes:
Net working capital (NWC) is determined as current assets less current liabilities (excluding cash or debt-related elements).
Michael Kors NWC only available for FY12A-FY14E.
Page 20
Net working capital requirements for cosmetics companies

appear more limited compared to other luxury segments, with a
stable trend over the period

Net working capital requirements are very heterogeneous in the cosmetics segment.
Companies levels of requirements are expected to remain mainly stable over the FY12A-FY15E period.
However, Natura net working capital is expected to decrease as a % of sales.
Net work ing capital as a % of sales ( %)
16 %
14%
2012
2015
12%
2015
2012
2015
10%
8%
2015
2012
6 %
2012
2012
2015
2015
4%
2015
2012
2%
0%
- 2%
2012
- 4%
-6 %
Shiseido
L Occitane
Est e Lauder
Note: Net working capital (NWC) is determined as current assets less current liabilities (excluding cash or debt-related elements).
Beiersdorf
Natura
L Or al
Coty
Page 21
LVMH: sum of the parts (SOTP)
Sales breakdown, FY14E (in b)
EBIT breakdown, FY14E (in b)
Enterprise value breakdown, FY14E (in b)
31.5
9 .7
1.0
1.4
31%
4.3
2.9
3.8
6 .6
16 %
21%
14%
0.4
7%
3.4
9 %
5 .6
7%
12.4
0.4
6 %
13.7
45 .1
12%
11.0
DCF and valuation

parameters
LVMH SOTP analyses imply a total enterprise valuation of 85.3b in FY14E.

The fashion and leather segment is the largest contributor both in terms of sales (35%) and EBIT (53%).
6 .1
7%
5 .4
6 %
85 .3
15 %
16 %
5 3%
5 3%
35 %
Fashion
and
leather
goods
Perf umes
and
cosmetics
Watches
and
j ewelry
Luxury products
(excluding spirits)
Wines
and
spirits
Selective Eliminations
retailing
( 3.1)
( 0.1)
( 0.3)
- 2%
Total
Fashion
and
leather
goods
Perf umes
and
cosmetics
Watches
and
j ewelry
Wines and
spirits
Selective Eliminations
retailing
Luxury products
(excluding spirits)
- 4%
Total
Fashion
and
leather
goods
Perf umes Watches

and
and
cosmetics j ewelry
Wines
and
spirits
Selective Eliminations Herms

retailing
stak e
Total
Luxury products
(excluding spirits)
Source: SOTP based on EY analysis and on the following brokers reports: Raymond James (31 January 2014), Barclays (31 January 2014),
Socit Gnrale (31 January 2014) and Kepler Cheuvreux (11 December 2013).
Page 22
Kering: SOTP
Kering SOTP analyses imply a total enterprise value of 25.5b in FY14E.

Contributing around 98% of the total EBIT for 68% of sales, Gucci Group is the most profitable segment in
terms of operating margin.
2.9

0.0
0.3
10.1
0.1%
3%
1.8
0.1
0.0
8%
1.0%
1.8
24.9
2.2
0.3
9 %
1.0%
25 .5
29 %
6 .9
9 8%
9 8%
6 8%
Gucci Group
Puma
Volcom
Eliminations
Total
Gucci Group
Luxury
Division
Sports & Lifestyle

Division
Luxury
Division
Puma
Volcom
( 0.1)
( 1.9 )
- 7%
- 7%
Eliminations
Total
Sports & Lifestyle

Division
Source: SOTP based on EY analysis and on the following brokers reports: Credit Suisse (28 February 2014), Deutsche Bank (24 February 2014),
Socit Gnrale (24 February 2014) and JP Morgan (21 February 2014).
Gucci Group
Luxury
Division
Puma
Volcom
Sports & Lifestyle

Division
Eliminations
Total
Kering: further analysis of Gucci Group through SOTP approach
Gucci Group SOTP analyses imply an enterprise value of 24.9b in FY13E.

Within the Gucci Group segment, the Gucci brand alone represents 53% of the top line and 65% of EBIT in
FY14E, meaning that the Gucci brand is expected to constitute the largest segment within the Gucci Group
and is also the most profitable in terms of operating margin.

1.5
6 .9

0.2
0.1
22%
0.4
3.0
1.8
10%
1.5
5 %
1.1
21%
9 %
12%
6 %
5 .6
0.6
24.9
23%
1.1
14.8
16 %
3.6
6 5 %
5 9 %
5 3%
Gucci b rand
Bottega Veneta
Y SL
Other b rands
Gucci Group
Gucci b rand
Bottega Veneta
Y SL
Other b rands
Gucci Group
Gucci b rand
Bottega Veneta
Y SL
Other b rands
Gucci Group
Source: SOTP based on EY analysis and on the following brokers reports: Credit Suisse (28 February 2014), Deutsche Bank (24 February 2014),
Socit Gnerale (24 February 2014) and JP Morgan (21 February 2014).
DCF and valuation

parameters
Page 23
Page 24
LOral: segment analysis
The LOral Luxe division accounts for 26% in the total sales in FY13A.
This division is expected to register a sales growth at a CAGR of 6% over the 2012-16E period, when
its operating income is anticipated to grow from 1,077m to 1,493m (or at a CAGR of 9%) over the
same period.
The LOral Luxe division will remain one of the biggest divisions within LOral.
Sales breakdown, FY12AFY16E (in b)
EBIT breakdown, FY12AFY16E (in b)
EBIT margin, FY12A-FY16E (in %)
30
25 %
4.7
4.5
24.9
25
22.5
26 %
26 %
CAGR
6 %
5 %
4.1
5
3.7
6 %
25 %
6 %
6 %
3.9
8%
8%
5 %
5 %
25 %
24%
6 %
8%
6 %
6 %
7%
7%
7%
7%
7%
20
23.6
23.0
25 .7
20%
9 %
9 %
8%
32%
30%
30%
29 %
15
10
19 %
30%
16 %
18%
18%
17%
21%
21%
20%
20%
18%
15 %
CAGR
9 %
10%
48%
48%
48%
48%
49 %
5 5 %
5 6 %
5 6 %
5 5 %
5 5 %
5 %
1
5
14%
13%
13%
13%
12%
17%
16 %
16 %
15 %
15 %
( 16 %)
( 16 %)
( 15 %)
( 15 %)
( 15 %)
2012A
2013A
2014E
2015 E
0%
-1
2012A
2013A
2014E
2015 E
Prof essional products
Consumer products
Active cosmetics
Other
Source: Analyst research (H2 2012)

2016 E
L Or al Luxe
2016 E
Prof essional products
Consumer products
L Or al Luxe
Active cosmetics
Other
Eliminations
2012A
2013A
2014E
L Or al Luxe
2015 E
Total
2016 E
Page 25
Level of multiples illustrates the growing attractiveness of the

luxury sector
Trading multiples
trading multiples
The expected evolution of valuation multiples is the result of an improvement in the top-line growth as well
as in the operating efficiency of the luxury companies.
The average top-line growth for luxury companies is expected to average around the 10% level over
FY 2012A15E.
EV/sales (FY12A-15E)
4.0x
3.5 x
3.7x
3.2x
EV/EBITDA (FY12A-15E)
Price to earnings (FY12A-15E)
18.0x
30.0x
15 .3x
3.3x
3.0x
3.0x
2.8x
25 .0x
12.7x
2.6 x
2.5 x
2.5 x
28.2x
25 .0x
15 .0x
2.9 x
29 .4x
13.3x
21.8x
11.8x
12.0x
11.8x
10.9 x
18.8x
20.0x
10.4x
21.0x
2.0x
18.2x
16 .8x
9 .7x
9 .0x
15 .0x
6 .0x
10.0x
3.0x
5 .0x
1.5 x
1.0x
0.5 x
2012A
2013A/ E
Average
2014E
2015 E
2012A
2013A/ E
Median
Average
2014E
Median
2015 E
2012A
2013A/ E
Average
2014E
2015 E
Median
Notes:

The results of 2013 are actual (A) if the financial results are closed and expected (E) if the financial year is not closed yet.
DCF and valuation

parameters
In the luxury sector, expected strong growth and margin improvements are reflected in valuations of
Page 26
Sales multiples illustrate the dynamism of cosmetics over the

past years
Trading multiples
Cosmetics companies valuation trading multiples are expected to follow the same trend as the one
expected for luxury companies
Sales multiples illustrate continuous improvement in cosmetics companies top line from FY12A to FY15E,
with 2012 average growth of 4.6% expanding to 6.5% in 2015.
EV/sales (FY12A-15E)
EV/EBITDA (FY12A-15E)
3.5 x
18.0x
3.0x
15 .0x
Price to earnings (FY12A-15E)

35 .0x
30.0x
13.8x 13.9 x
13.1x 13.1x
2.5 x
2.4x
2.3x
2.4x
2.2x
12.0x
2.1x
25 .0x
11.0x
2.1x
26 .2x
25 .8x
11.8x
2.3x
28.2x
2.0x
10.8x
24.2x
22.7x
22.1x
10.5 x
2.0x
20.4x 20.2x
20.0x
9 .0x
1.5 x
15 .0x
6 .0x
1.0x
10.0x
3.0x
0.5 x
5 .0x
2012A
2013A/ E
Average
2014E
2015 E
2012A
2013A/ E
Median
Notes:
The results of 2013 are actual (A) if the financial results are closed and expected (E) if the financial year is not closed yet.
Average
2014E
Median
2015 E
2012A
2013A/ E
Average
2014E
Median
2015 E

summary of EV/sales multiples
Trading multiples
EV/sales (FY13A/E)
EV/sales (FY14E)
Herm s
6.3x
Herm s
Michael Kors
6.2x
Moncler
TUMI
3.3x
Swatch
Hengdeli
3.3x
Richemont
Swatch
3.3x
L' Or al
3.1x
Tiffany
4.3x
Michael Kors
4.2x
Brunello Cucinelli
3.3x
Prada
3.0x
3.2x
Swatch
2.8x
L' Or al
2.8x
2.9x
Richemont
2.7x
2.9x
Tiffany
3.0x
Tiffany
3.2x
Richemont
5.1x
Moncler
3.5x
Prada
3.7x
Prada
4.9x
3.7x
Brunello Cucinelli
4.2x
Herm s
5.0x
Michael Kors
5.8x
Moncler
Brunello Cucinelli
EV/sales (FY15E)
5.6x
2.7x
TUMI
2.8x
Coach
2.5x
Average
3.0x
Hengdeli
2.8x
Salvatore Ferragamo
2.5x
Salvatore Ferragamo
3.0x
Salvatore Ferragamo
2.8x
Average
2.5x
L' Or al
3.0x
Average
2.7x
Tod' s
2.5x
Luxottica
2.8x
Tod' s
2.7x
Luxottica
Tod' s
2.8x
Luxottica
2.6x
TUMI
2.5x
2.4x
2.4x
Hengdeli
Hugo Boss
2.7x
Coach
Burberry
2.7x
Hugo Boss
2.5x
Est e Lauder
Est e Lauder
2.6x
Est e Lauder
2.5x
Hugo Boss
2.4x
Burberry
2.6x
2.3x
2.3x
2.2x
Coach
2.5x
Burberry
Natura
2.5x
LVMH
2.3x
Beiersdorf
2.1x
LVMH
2.5x
Natura
2.3x
LVMH
2.1x
Beiersdorf
2.3x
Natura
2.4x
Beiersdorf
2.3x
Kering
2.1x
L' Occitane
1.8x
Ralph Lauren
Chow Tai Fook
1.8x
Coty
1.7x
Coty
Industry benchmark
Low
Industry benchmark
1.7x
Coty
1.6x
1.5x
Ralph Lauren
1.4x
1.1x
Shiseido
0.9x
afilo
0.9x
2.5x
2.7x
High
L' Occitane
Chow Tai Fook
1.2x
afilo
3.0x
Low
1.7x
1.6x
Shiseido
1.1x
afilo
1.7x
Chow Tai Fook
1.2x
Shiseido
1.9x
L' Occitane
Ralph Lauren
2.1x
2.0x
Kering
2.1x
Kering
High
Low
Industry benchmark
High
Note: Market capitalization is based on a one-month average as of 31 March 2014.
DCF and valuation

parameters
Page 27
Page 28

summary of EV/EBITDA multiples
Trading multiples
EV/EBITDA (FY13A/E)
EV/EBITDA (FY14E)
22.6x
Brunello Cucinelli
Brunello Cucinelli
19.3x
Michael Kors
15.5x
Moncler
13.2x
L' Or al
13.1x
15.3x
Hengdeli
14.3x
15.4x
15.3x
Tumi
17.6x
Herm s
Moncler
15.9x
Beiersdorf
Brunello Cucinelli
16.0x
Michael Kors
17.4x
Herm s
20.3x
Herm s
17.7x
Moncler
EV/EBITDA (FY15E)
L' Or al
14.1x
Michael Kors
12.9x
Beiersdorf
14.0x
Beiersdorf
12.8x
Luxottica
12.9x
Est e Lauder
11.7x
Est e Lauder
12.9x
Luxottica
11.6x
Luxottica
14.3x
L' Or al
14.3x
Tumi
12.5x
Salvatore Ferragamo
11.0x
Salvatore Ferragamo
14.3x
Hengdeli
12.5x
Tumi
10.8x
12.5x
Hengdeli
Est e Lauder
14.0x
Chow Tai Fook
Salvatore Ferragamo
13.4x
Average
Average
13.2x
L' Occitane
13.1x
13.0x
Tiffany
11.8x
Shiseido
Chow Tai Fook
11.6x
Average
Tiffany
11.3x
Tiffany
10.8x
10.5x
10.5x
10.2x
Shiseido
11.0x
Chow Tai Fook
Richemont
11.8x
Prada
10.9x
Prada
9.7x
Hugo Boss
11.8x
Richemont
10.6x
Tod' s
9.6x
Shiseido
11.8x
Tod' s
10.6x
Richemont
9.6x
Prada
11.7x
L' Occitane
10.6x
Swatch
9.5x
10.0x
Tod' s
11.6x
Swatch
10.6x
Hugo Boss
9.5x
Coty
11.5x
Hugo Boss
10.6x
Coty
9.3x
Natura
11.0x
Natura
9.9x
L' Occitane
Kering
10.8x
Kering
9.9x
Natura
9.0x
8.9x
Swatch
10.6x
afilo
10.5x
Burberry
10.4x
LVMH
9.4x
Coach
Industry benchmark
Note: Market capitalization is based on a one-month average as of 31 March 2014.
8.9x
Coach
9.2x
8.5x
LVMH
8.8x
8.4x
Ralph Lauren
8.3x
Ralph Lauren
7.2x
afilo
8.1x
afilo
7.0x
7.6x
High
Kering
Burberry
Coach
13.2x
Low
9.8x
9.6x
LVMH
10.1x
Ralph Lauren
Coty
Burberry
9.2x
10.5x
11.8x
Low
Industry benchmark
High
Low
Industry benchmark
High
Page 29
Regression analysis: EV/sales multiple vs. EBITDA margin, 2014

and 2015 growth
Trading multiples
Analysis shows strong correlation between EV/sales levels and profitability but limited
Moncler
5 .0x
2014 EV/ sales
6 .0x
Herms
= 0.5 5 72
Michael Kors
4.0x
Brunello Cucinelli
Hugo Boss
Prada
Salvatore Ferragamo
Swatch
TU MI
Hengdeli
Tif f any
Est e Lauder L Or al
Tod s R ichemont
Coach
Beiersdorf
Luxottica
Burb erry
L Occitane
LVMH
Kerning
Chow Tai Fook
Natura
Coty R alph Lauren
Shiseido
3.0x
2.0x
1.0x
4.0x
Coach
5 %
10%
15 %
20%
25 %
30%
35 %
3.0x
2.0x
Coty
1.0x
Safilo
0%
Moncler
40%
( 4.0%)
Safilo
1.0%
6 .0x
Herms
3.0x
Luxottica
Hengdeli
2.0x
1.0x
Shiseido
0%
5 %
10%
L Or al
Est e Lauder
Beiersdorf
Coty
Chow Tai Fook
Safilo
15 %
Michael Kors
Salvatore
Ferragamo
Tif f any
Swatch
Prada
Tod s
Coach
TU MI
LVMH
Kering
R ichemont
Burb
erry
Natura
R alph Lauren
Hugo Boss
20%
25 %
11.0%
16 .0%
21.0%
26 .0%
31.0%
30%
35 %
= 0.26 83
Herms
Moncler
40%
Michael Kors
4.0x
Brunello Cucinelli
Prada
Tif f any
Swatch R ichemont
Tod s
Coach
Salvatore Ferragamo
Luxottica
Natura Burb erry Hengdeli
Est e Lauder LVMH
Coty
Beiersdorf Kering Hugo Boss
L Occitane
R alph Lauren
Chow Tai Fook
Shiseido
Safilo
3.0x
2.0x
1.0x
2015 EBITDA margin ( %)
5 .0x
Moncler
2015 EV/ sales
2015 EV/ sales
5 .0x
Brunello
Cucinelli
6 .0%
2014 sales growth ( %)
= 0.5 802
4.0x
Michael Kors
Brunello Cucinelli
Prada Swatch
Tif f any Salvatore Ferragamo
R ichemont
L Or al
Luxottica
Hengdeli
Tod s
TU MI
LVMH
Hugo Boss
Beiersdorf
Burb erry
Kering Natura
L
Occitane
Est e Lauder
R alph Lauren Chow Tai Fook
Shiseido
2014 EBITDA margin ( %)
6 .0x
Herms
= 0.2201
5 .0x
2014 EV/ sales
6 .0x
DCF and valuation

parameters
correlation with growth.
0%
5 .0%
10.0%
15 .0%
TU MI
20.0%
25 .0%
2015 sales growth ( %)
Notes: Market capitalization is based on a one-month average as of 31 March 2014. The 2014 growth corresponds to the sales growth rate between FY13E and FY14E, when the 2015 growth corresponds to the sales growth rate between FY14E and FY15E.
Page 30
Transaction multiples in the luxury industry remain at a

significant premium to many other sectors
Transaction multiples illustrate the growing attractiveness of the industry over the past few years.
They also reflect a premium to rarity: indeed, the brands reputed to be on the market are very few, and
the buyers recognize this and agree to pay a higher price to ensure the priority of the deal.
The average sales multiple over the last five years ranged between 0.5x and 1.7x, when the EBITDA
multiple ranged between 6.6x and 15.3x.
EV/sales (FY09-1H14)
EV/EBITDA (FY09-1H14)
2.0x
18.0x
1.7x
1.8x
16 .0x
15 .3x
1.6 x 1.6 x
1.6 x
1.5 x
1.4x
14.0x
1.2x
1.2x
12.3x
1.3x
1.3x
1.2x
1.1x
12.0x
12.0x
11.8x
11.2x
10.7x
1.1x
9 .9 x
10.0x
10.4x
1.0x
8.0x
7.5 x
0.8x
6 .6 x
6 .0x
0.6 x
0.5 x 0.5 x
2.0x
0.2x
2009
2010
2011
Average
Source: Capital IQ
4.8x
4.0x
0.4x
0.0x
5 .2x
2012
Median
2013
1H14
0.0x
2009
2010
2011
Average
2012
Median
2013
1H14
The M&A deals in the cosmetics industry show similar trend as

the luxury industry
The average sales multiple over the last five years ranged between 1.0x and 2.4x, when the EBITDA
multiple ranged between 6.9x and 16.0x. 1H14 transaction multiples in the cosmetics industry materially
differ from the averages of the previous years. Looking at the specific transactions, we note that valuations
were positively impacted by strategic acquisitions carried out by the major players to foster growth in
emerging markets and broaden the products offering into more innovative segments. In this respect, these
two key themes coupled with the uniqueness of targets have largely increased average valuations.
EV/sales (FY09-1H14)
EV/EBITDA (FY09-1H14)
20.0x
3.0x
18.0x
2.4x
2.5 x
16 .0x
16 .0x
14.0x
2.0x
2.0x
1.7x
14.9 x
1.9 x
1.8x
1.7x
1.7x
1.8x
11.7x
12.0x
10.7x
1.6 x
1.5 x
10.0x
1.1x
8.0x
1.0x
0.9 x
1.0x
9 .1x
6 .9 x
10.2x
10.0x10.1x 10.1x
8.8x
6 .5 x
6 .0x
4.0x
0.5 x
2.0x
0.0x
2009
2010
2011
Average
2012
Median
2013
1H14
0.0x
2009
2010
2011
Average
2012
2013
1H14
Median
Source: Capital IQ
DCF and valuation

parameters
Page 31
2014 sales outlook still solid: Looking at

luxurys core Chinese consumer, as well
as Korea, Japan, the US and even parts of
Europe, there are still reasons to believe
2014 should be at least as strong as 2013
in terms of organic sales growth for the
sector. We believe the outlook for the
industry sounds optimistic.
Global luxury goods, HSBC research, March 2014
Industry overview
Purchase intent for the next 12 months is

rising across most categories we surveyed
and across all key emerging markets (except
for mixed trends in Brazil). Around 50% of
consumers we surveyed plan to purchase
Western brands over the next 12 months,
with sporting goods standing out.
Global luxury goods, Credit Suisse, February 2014
Global luxury goods market
Global cosmetic goods market
Industry overview
Page 34
Worldwide growth in the personal luxury goods market falls to

lower single digits after three years of strong double-digit growth
Worldwide personal luxury goods market trend1

13.1%
11.0%
25 0
200
8.1%
8.2%
6 .9 %
b illion
15 0
100
147
16 7
15 9
173
15 3
19 2
15 %
CAGR :
+ 4- 6 %
10.4%
212
30%
217
245 - 25 5
20%
2.4%
5 0
0%
- 1.8%
10%
0%
- 10%
-5 0
-5 %
- 20%
- 100
- 15 0
10%
5 %
170
40%
Growth ( %)
300
Luxury goods demand growth by nationality (2009-15E)2
DCF and valuation

Industry
parameters
overview
- 8.4%
2005
2006
2007
2008
2009
Mark et size
2010
2011
2012
2013e
2016 e
- 10%
Growth
Sources: Bain & Company and Fondazione Altagamma and other selected research.
Notes: 1) Worldwide Markets Monitor, October 2013, and Worldwide Luxury Markets Monitor, spring 2014, Bain & Company
and Fondazione Altagamma.
2) Luxury Outlook 2014, Deutsche Bank, January 2014.
- 30%
2009
Chinese
2010
2011
North American
2012
European
2013e
2014e
J apanese
2015 e
Other
DCF
Industry
and overview
valuation parameters
Page 35
Industry overview
The worldwide personal

luxury goods market is
estimated to have grown
2.4%
by
in 2013.
However, at constant
exchange rates, the
market with 6.0% growth
has outpaced the real
growth of 5.0% recorded
in 2012.
The industry experienced

the majority of its
demand coming from
younger premium
customers, emerging
economies and a reviving
US luxury market.
Retail is still an important

growth driver, mainly
fueled by network
expansion through the
opening of ~600 new
directly operated stores.
The organic growth
decelerated as more
focus was placed on
in-store renovations in
key markets versus new
store openings.
In 2013, the US
experienced a revival in
demand and the
European
consumer
demand is
expected
to stabilize
following expectations
of an improving
economic
environment and
recovery in most
European countries
with the exception of
Italy and France.
The online luxury goods

market continued its
successful run, with its
share of online
penetration increasing to
4.5% in 2013 from

3.6% recorded in the
previous year. The

brands are increasingly
leveraging the channel
for both sales and
communication.
(+7%)
Americas
surpassed Asia
(+5%) as luxurys
main growth engine, with

positive trends expected
to continue in 2014.
Demand from Chinese

consumers is expected to
trend downward due to
ongoing austerity
measures, which seem to
have curbed luxury
spending by
10%15%.
The fluctuations in the
euro
penalized the
market performance,
yen
with Japanese
contributing over half of
the differential between
real and nominal growth.
Page 36
DCF and valuation

Industry
parameters
overview
Luxury goods market growth by geography
US: Strong consumer confidence among the affluent class and an improving wealth effect have sustained US
luxury spending and should continue to do so in 2014.
Japan: Japanese luxury consumers repatriated demand to their domestic market in 2013, as a result of the
weak yen. We expect this trend to continue in 2014; however, some uncertainties can be linked to
consumers reactions to luxury prices increasing in response to the FX move and the increase in VAT.
Luxury goods, Deutsche Bank, April 2014
Y ear- on- year growth
Luxury goods market growth by geography1

(constant exchange rates)
14%
12%
10%
8%
6 %
4%
2%
0%
- 2%
12%
10%
10%
The yens massive devaluation, which started in 2013, has partially slowed, resulting in repatriated Japanese
luxury spending from South Korea, Europe and the US, greatly benefiting local consumption.
9 %
7%
3%
4%
5 %
5 %
5 %
3%
Europe
Americas
2012A
- 1%
J apan
2013E
4%
3%
4%
Asia-Pacific R est of the world

2014F
Real GDP growth by selected market (2012-15E)2

(In %)
FY12A FY13E FY14E FY15E
Global
2.6
2.5
3.0
3.5
US
2.8
1.9
2.4
3.0
(0.6)
(0.4)
1.1
1.5
1.4
1.5
1.4
1.3
Eurozone
Japan
UK
0.3
1.7
2.8
2.6
CEE*
4.6
4.2
4.0
5.9
Brazil
1.0
2.3
1.9
2.9
Russia
3.4
1.3
1.0
1.7
India
4.7
4.6
5.3
6.0
China
7.7
7.7
7.5
7.6
Key currency fluctuations impacting luxury purchasing patterns
Russias ruble devaluation has worsened since 2013 due to its lower credit rating and geopolitical turbulence,
which has deepened its economic slowdown, reducing Russian international purchases (especially in Europe).
The Indonesian rupiah and Brazilian real have weakened amid slower economic growth and persistent inflation,
reducing purchases in Europe and Singapore and, to a lesser extent, the US.
Digital sales driving growth
Online penetration continued to expand at a rapid pace and reached 4.5%, supported by 30% y-o-y growth in
real terms.
The online luxury market is enormously skewed to the US, with the Americas accounting for ~60% of the
worldwide luxury market and accessories having the highest online penetration.
A number of players have entered the online arena, each having sizable share of the overall market: Brands.com
(35%), E-Tailers (30%) and Retailers.com (35%)
BRIC
economies
M-commerce currently represents one-third of traffic and over 10% of sales for some brands.
*Central and Eastern Europe
Sources: Bain & Company and Fondazione Altagamma and other selected research.
Notes: 1) Worldwide Markets Monitor, October 2013, and Worldwide Luxury Markets Monitor, Spring 2014, Bain & Company and Fondazione Altagamma.
.
2) IHS Global Insights.
Industry
DCF
and overview
China becoming a mature market with consolidating growth rates
Mainland Chinese personal luxury

goods markets (2011-2014F)1
Top three global personal luxury goods

markets (2013E)1
Second position glob ally af ter
including Hong Kong
16
14
15 - 16
15 .3
15 .0
70
5 0
b illion
10
8
6
40
30
23.0
17.2
20
4
2
10
2011
2012
2013E
2014F
U S
Mainland China
and Hong Kong
J apan
Share of urban households in China2

100%
80%
16
29
20%
0%
5 4
14
3
2012
Affluent
Mass middle class
Primary drivers of growth include a sustained domestic market, improved

performance from Hong Kong and Macau, more spending from top foreign markets
in new geographies (South Korea, US West Coast), and sustained spending in
Europe.
Brands are reshaping their strategies, pushing high-end products and attempting
to improve service levels.
Chinese consumers confirm dominance as top global customer
In 2013, Chinese consumers accounted for about 29% of global luxury sales and
are heading to become nearly one-third of the luxury market.
5 4
The Chinese middle class is evolving, with more higher-income households, which
is favorable for luxury spending.
9
2022E
Upper middle class
The Chinese market is expected to maintain low-single-digit growth in 2014, with a

corruption crackdown still reducing sales, especially impacting gifting.
22
6 0%
40%
Sluggish growth in Greater China
Significant price differential vs. abroad is driving purchases overseas, with luxury
retail expanding at slower pace.
6 0
12.5
12
b illion
6 2.5
Poor
Sources: Bain & Company and other selected research

Notes: 1) Worldwide Markets Monitor, October 2013, and Worldwide Luxury Markets Monitor, Spring 2014, Bain & Company
and Fondazione Altagamma.
2) Luxury Outlook 2014, Deutsche Bank, January 2014.
By 2020, Chinese consumers are expected to add 70b80b (or 30%40%) to

luxury demand.
The increase in the number of wealthy households and of their average disposable
income is expected to drive growth levels in the teens in luxury demand in China,
even assuming subdued HNWI spending due to government austerity measures.
Industry overview
Page 37
Page 38
DCF and valuation

Industry
parameters
overview
Accessories continues to lead the pack amid polarization of

consumption across categories
Global personal luxury goods market

by product type (2013E)1
4%
Accessories
20%
28%
Apparel
Hard luxury
Beauty
23%
25 %
Other
Growth rates of global personal luxury

goods market by product type1
Other
Hard luxury
2%
Beauty
2%
Apparel
Accessories
0%
Sources: Bain & Company and other selected research
3%
0%
Womens RTW witnessed down trading in mature markets, with more impact from
the competition from premium brands and apparel retailers.
13%
8%
The high-end segment has shown super-performance in all its different shades,
including made-to-measure and sartorial, absolute luxury and first lines.
16 %
4%
5 %
10%
2012
15 %
20%
2013
Note: 1) Worldwide Markets Monitor, October 2013, and Worldwide Luxury Markets Monitor, Spring 2014, Bain & Company and
Fondazione Altagamma.
Apparel: high-end segment outperforming
Mens ready-to-wear (RTW) is outperforming womens in most markets, except for

formalwear in Mainland China.
4%
1%
Accessories: resilient growth
Brands are increasingly investing in the segment by opening dedicated stores.

The online penetration is in line with the overall average of the sector.
Hard luxury: strong polarization
Leather goods have been growing consistently over the years, with the mens
segment recording double-digit growth.
Strong polarization is observed as both high-end jewelry and affordable grow

significantly.
Top players are investing in leather suppliers and animal farms as last year witnessed
the strongest focus on ultimate luxury, with precious skins ruling.
Silver and costume jewelry from fashion brands performed well thanks to the
growing middle class in emerging markets, with the latter becoming more of a
fashion item.
Shoes represent one of the fastest-growing categories, with both mens and womens
categories witnessing solid performance driven by specialist players.
The online channel has been leveraged well by accessories segment, which has the
highest online penetration, with shoes above 10%.
The eyewear market is pegged at 10b; eyewear specialist and house brands make up
a large portion, with absolute/niche players showing the highest growth.
The demand for watches is slowing down in real terms as over-exposed brands are
suffering in Mainland China.
The accessible watch segment is showing the highest dynamism.
Online penetration for hard luxury is far below average, with specialist
watchmakers almost absent from the channel.
Page 39
Industry overview
Industry
DCF
and overview
Page 40
DCF and valuation

Industry
parameters
overview
Worldwide cosmetics market is solid, dynamic and fast-moving
Global cosmetics industry market growth, YOY (2004-13)1

200
Global cosmetics market segmentation by products

and geographies (2013)1
6 .0%
4.9 %
5 .0%
4.2%
15 0
3.4%
4.6 %
1%
4.6 %
Sk in care
5 .0%
11%
3.8%
3.8%
Hair care
34%
13%
4.0%
Mak eup
3.0%
Fragrances
100
17%
Hygiene products
24%
b illion
2.9 %
Oral cosmetics
2.0%
1.0%
5 0
3%
1.0%
123
0
2004
127
2005
134
2006
141
145
2007
2008
Cosmetics mark et
147
2009
15 3
16 1
16 8
175
2010
2011
2012
2013
Asia- Pacific
8%
0.0%
Western Europe
33%
13%
Growth %
North America
Latin America
21%
22%
Eastern Europe
Af rica, Middle East
Sources: LOral Annual Report 2013 and other selected research.

Note: 1) LOral estimates of worldwide cosmetics market based on manufacturer net selling prices. Excluding soap, toothpaste, razors and blades. Excluding currency fluctuations.
Industry
DCF and overview
Page 41
Industry overview
The global cosmetics

market grew by an
3.8%
estimated
during 2013, which
was slightly lower than
the historical average
over the past 15 years
estimated at
approximately 4.1%.
The combined effects of

population,
urbanization, progress
in infrastructure and
growth in world GDP will
continue to drive the
market.
The population with
access to modern
cosmetics could grow by
50% over the next 20
years, boosted by the
rapid rise of the urban
middle class in the new
markets.
The consumer behavior

has not changed since
the
market has
continued
to expand
steadily.
the crisis, and
The beauty market is set

to double in size in the
next 10 to 15 years, and
all the worlds regions
will grow, with China, the
The top trio of countries
US, Brazil, India and
and
Japan expected to
(new markets) become the top markets.
China
Brazil
and the US
(a mature market)
contributed almost
half the
growth of the
worldwide cosmetics
market in 2013.
By 2020, it is estimated
that more than half of
consumers will be
located in tropical zones
with hot, humid climates,
and some 60% of the
worlds population will
live in major urban
centers affected by
pollution. These trends
will further boost the
demand for
quality
cosmetic
products.
Glossary
Contact us
Page 42
DCF and valuation

Industry
parameters
overview
Resilient demand
Cosmetics industry remained resilient even in a difficult

economic period
Demand for cosmetics has not been impacted by the economic crisis, with
consumers aspiring for better quality products and eager for new technology
and ideas.
The beauty market is a supply-driven market fueled by innovation, and
consumers are always looking for quality, performance and perceived results.
The market has been bolstered by the rise of middle classes all over the world.
Widespread growth
The market was buoyant on all continents, even in Western Europe, with growth of
nearly 3.0%.
From a geographic viewpoint, the new markets continue to attain increasing levels
of growth. Excluding Japan, they represented 80% of worldwide market growth due
in equal shares to Asia-Pacific and Latin America.
With growth of 4.6%, the selective market continued to grow at a steady pace in
2013, bolstered by Asia. Travel retail contributes 24% of global growth.
With growth of 3.9%, mass-market sales tailed off, particularly due to lagging
demand in the US and Asia.
Dermocosmetics: huge potential
Digital media: the game changer
Dermocosmetics products that combine cosmetic and dermatological action to

preserve the health and beauty of skin and hair grew by 5.0% in 2013.
Digital media has emerged as a crucial dimension for the brands, with beauty
product consumers constantly looking for tips and recommendations.
Traditionally strong in Western Europe, the segment is witnessing its development

accelerate in North America and the new markets
The internet is increasingly integrated into the buying process in a multi channel
context with rise of digital media and social networks.
The dynamism stems from the strong consumer appeal of products combining
efficacy and safety with good value.
With consumer opinions just a click away, they influence final choices both online
and in the store.
The distribution channels that earlier included traditional pharmacy and

parapharmacies channels have now expanded to drugstores, dermacenters in
department stores and medi-spas.
The online medium helps maintain a more direct and participative relationship with
their consumer-ambassadors while providing them with richer experiences and
services attuned to their vision of beauty.
Sources: LOral Annual Report 2013 and other selected research.

Notes: 1) LOral estimates of worldwide cosmetics market based on manufacturer net selling prices. Excluding soap, toothpaste, razors and blades. Excluding currency fluctuations.
Page 43
Industry overview
DCF
Industry
and overview
The longer-term outlook also remains positive

as the world population with access to
cosmetics in emerging markets is estimated
to increase by 50%.
Paul Wood
Partner, Advisory
Methodology
SOTP analyses
Focus on Moncler, Coty, Tumi, Chow

Tai Fook and Hengdeli
DCF AND VALUATION PARAMETERS
Sample selection
EXECUTIVE SUMMARY
Approach
Methodology
INDUSTRY OVERVIEW
SAMPLE SELECTION
AND SPECIFIC ANALYSES
Glossary
GLOSSARY
Contact
us
EY
EXPERTS
Page 46
Methodology
Approach
There are many criteria to analyze the operating and financial performances of listed companies.
The aim of this survey is not to conduct a detailed analysis of the selected companies.
The approach implemented in this fourth edition of the The luxury and cosmetics financial factbook essentially
relies on three types of information:
Several standard valuation parameters and operating aggregates
Industry characteristics (in terms of growth forecasts and drivers)
An overview of 28 major actors of the industry
Even though this data is important and essential to the analysis, it must be stressed that other criteria or
parameters could also have been analyzed.
The entirety of the data utilized in this factbook is publicly

disclosed information. The Transaction Advisory Services
teams of EY who participated in drafting this document have
not had access to any confidential information.
If the information used turns out to be incomplete or
incorrect, EY will not be held responsible for any impact this
may have on the results or the analyses presented in this
document.
It must be noted that the information provided in this study is
based on the latest available financial statements of each
company as at 31 March 2014. Market data has been
considered as of 31 March 2014, unless stated otherwise or
apart from subsequent pieces of information included in this
survey. Any modification of the analyzed groups financial
performances or any evolution of the financial markets that
occurred since 31 March 2014 could lead to partially or
completely different conclusions.
Please note that we have presented the actual 2013 figures
for the companies, which have already released their 2013
annual results as of 31 March 2014.
SOTP analyses
For the companies that have diversified activities (LVMH,
Kering, LOral), we performed sum-of-the-parts analyses to
isolate the pure luxury segment and to better understand its
characteristics, as well as its contribution to the companies
performance.
This analysis was not possible for Swatch, Beiersdorf and
Shiseido as no accurate data was available.
Methodology
Page 47
Sample selection
The sample analyzed is composed of 28 listed companies from the luxury and cosmetics
industry, of which 21 were mostly in the luxury business and 7 were in the cosmetics
segment.
To select these companies we proceeded as follows:
We firstly identified pure players of the luxury sector: Brunello Cucinelli S.p.A.
Please note that the sample has been adjusted in this fourth edition. Actually five
companies were added: Moncler and Coty have recently been listed, respectively, on
the Milan Stock Exchange and on the New York Stock Exchange. Tumi, Chow Tai Fook
and Hengdeli were included in the sample as they are also considered as the key players
in the luxury industry.
(Cucinelli), Burberry Group plc (Burberry), Coach Inc. (Coach), Chow Tai Fook Jewellery
Group Ltd (Chow Tai Fook), Hengdeli Holdings Limited (Hengdeli), Herms International
S.C.A. (Herms), Hugo Boss AG (Hugo Boss), Kering SA (Kering), LVMH Moet Hennessy
Louis Vuitton S.A. (LVMH), Michael Kors Holdings Ltd (Michael Kors), Moncler S.p.A.
(Moncler), Prada S.p.A. (Prada), Polo Ralph Lauren Corp. (Ralph Lauren), Compagnie
Financire Richemont S.A. (Richemont), Salvatore Ferragamo S.p.A. (Salvatore
Ferragamo), Swatch Group AG (Swatch), Tiffany & Co. (Tiffany), Tods S.p.A. (Tods) ,
and Tumi Holdings Inc. (Tumi).
We completed this first list with other players in cosmetics: Beiersdorf AG (Beiersdorf),
Methodology
Coty Inc (Coty), Este Lauder Companies Inc. (Este Lauder), LOccitane International
S.A. (LOccitane), LOral S.A. (LOral), and Shiseido Co. Ltd (Shiseido).
We also added companies that are in direct relation with luxury companies, such as
Luxottica Group S.p.A. (Luxottica) and Safilo Group S.p.A. (Safilo).
Finally we decided to include an actor, not part of the luxury environment, but acting
as the largest cosmetics company from the emerging markets, Natura Cosmticos S.A.
(Natura), to enlarge the geographical coverage.
Page 48

Methodology
Moncler: overview
We included Moncler in the sample as it was

listed on the Milan Stock Exchange on
16 December 2013.
Key facts:
Share trading pattern (post-listing)
Founded in 1952, Moncler SpA designs and distributes

upscale clothing and accessories for men, women and
children.
120
It is the reference brand in its core product category, the

down jacket.
105
It has evolved from a mostly functional, wholesaleoriented brand into a highly aspirational brand with a
much greater focus on retail distribution.
115
110
100
9 5
9 0
85
80
IPO details:
Total offered shares: 76.8m, all secondary shares
including 10.02m shares under greenshoe option.
Dec- 13
J an- 14
Feb - 14
Moncler S.p.A.
Mar- 14
FTSE MIB INDEX
Source: Capital IQ
Note: Moncler IPO date = 100
Initial price range: 8.7510.2

Final offer price: 10.2
The IPO was oversubscribed 31 times, with value
of institutional investors orders exceeding 20b.
It gave a staggering return of 46.8% on the
listing date.
FY13A
Sales
489
581
677
783
17.0%
EBITDA
162
192
220
258
16.9%
33.0%
33.0%
32.6%
32.9%
n.m
146
173
196
229
16.3%
29.8%
29.7%
29.0%
29.3%
n.m
82
96
117
144
20.5%
5.4%
229
5.8%
178
4.7%
102
5.0%
26
n.m
-51.8%
EBITDA margin
EBIT
EBIT margin
Net profit
Capex ratio
Net debt
Source: Capital IQ
Note: Financial figures are at 31 December. n.m = not meaningful
FY14E
FY15E
FY12AFY15E
CAGR
FY12A
Key financials (in m)
Methodology

Page 49
Coty: overview
We included Coty in the sample as it was

listed on the New York Stock Exchange on
13 June 2013.
Key facts:
Founded in 1904, Coty is a pure-play beauty company

that offers products in fragrances, color cosmetics
and skin and body care categories.
110
120
The company has a portfolio of well-known brands,

which include Calvin Klein, Davidoff, Marc Jacobs,
Chlo, Playboy, Balenciaga, Beyonc, Bottega Veneta,
Guess and others.
100
The company distributes its products through multiple

channels, including department stores, specialty
retailers, traditional food, drug and mass retailers,
salons and e-commerce.
80
IPO details:
Total offered shares: 65.7m, all secondary shares,
including 8.6m additional shares upon exercise of
underwriters option (out of which 93% or 8.0m
were exercised in the end)
Final offer price: US$17.50
The stock had a muted listing and closed below offer
price at US$17.36 on first day of trading
70
J un- 2013
J ul- 2013
Sep- 2013
Coty Inc.
Oct- 2013
Dec- 2013
NY SE Composite Index
J an- 2014
Mar- 2014
S& P 5 00 Index
Source: Capital IQ
Note: Coty IPO date = 100

Sales
EBITDA
EBITDA margin
FY12A
FY13A
FY14E
FY15E
FY12AFY15E
CAGR
3,347
460
13.7%
3,374
490
14.5%
3,335
577
17.3%
3,446
610
17.7%
1.0%
9.9%
n.m
n.m
EBIT
-137
300
386
418
EBIT margin
-4.1%
8.9%
11.6%
12.1%
n.m
Net profit
-235
122
214
237
n.m
Capex ratio
Net debt
3.8%
3.6%
5.1%
4.0%
n.m
1,522
1,416
1,104
944
-14.7%
Source: Capital IQ
Note: Financial figures are at 30 June. n.m = not meaningful
Methodology
9 0
Page 50

Methodology
Tumi: overview
We included Tumi in the sample as it has

emerged as a key player in the luxury industry.
Key facts:
Founded in 1975, Tumi Holdings, Inc. designs, produces
and markets travel and business product accessories in
multiple categories.
Share trading pattern (since January 2013)

130
120
Tumi distributes products globally in over 75 countries

through approximately 1,900 points of distribution.
110
The company utilizes multiple channels including retail,

wholesale and e-commerce.
100
Segment information:
The company generates 67% of its revenue from the
North American market.
The companys retail segment representing owned
stores in US and Europe contributes 50% of 2013 sales,
with balance coming from wholesale customers, which
includes specialty luggage retailers, prestige
department stores and business-to-business channels.
9 0
J an- 13
Feb - 13
Mar- 13
Source: Capital IQ
Note: 1 January 2013 = 100
Apr- 13
May- 13
J un- 13
Tumi Holdings, Inc.
Aug- 13
Sep- 13
Oct- 13
NY SE Composite Index
Nov- 13
Dec- 13
J an- 14
Feb - 14
FY12AFY15E
CAGR
FY12A
FY13A
FY14E
FY15E
Sales
EBITDA
EBITDA margin
EBIT
EBIT margin
289
60
20.9%
52
18.0%
339
73
21.5%
63
18.5%
394
89
22.6%
78
19.7%
458
103
22.6%
92
20.2%
16.6%
19.6%
n.m
21.1%
n.m
29.3%
Net profit
Net debt
27
40
48
58
5.2%
5.3%
5.2%
4.2%
n.m
-21
-56
-99
n.m
Source: Capital IQ
Note: Financial figures are at 31 December. n.m = not meaningful
Mar- 14
S& P 5 00 Index
Capex ratio
J ul- 13
Methodology

Page 51
Chow Tai Fook: overview
We included Chow Tai Fook in the sample as

it has emerged as a key player in the luxury
industry.
Founded in 1929, Chow Tai Fook is a jeweler with an

extensive retail network, with over 2077 points of sale in
more than 470 cities in Greater China, Singapore and
Malaysia and has a growing presence in e-commerce.
Its principal products are mass luxury jewelry and
high-end luxury jewelry products including gem-set
jewelry, gold products and platinum and karat gold
products, and watches.
Share trading pattern (since January 2013)

115
100
85
70
5 5
The groups vertically integrated business model gives it

an effective and tight control over the entire operation
chain: raw material procurement, design, production,
and marketing and sales.
Source: Capital IQ
Mainland China market constitutes approximately half of

companys revenues, with remaining half generated in
Hong Kong, Macau and other Asian markets.
J an- 13
Feb - 13
Mar- 13
May- 13
J ul- 13
Aug- 13
Chow Tai Fook J ewellery Group Ltd.

Sales
EBITDA
EBITDA margin
EBIT
EBIT margin
Net profit
Capex ratio
Net debt
Sep- 13
Nov- 13
Dec- 13
Feb - 14
Mar- 14
Hang Seng Index
FY14E
FY15E
FY12AFY15E
CAGR
FY12A
FY13A
5,374
7,094
7,924
9,029
18.9%
712
939
1,088
1,262
21.0%
13.2%
13.2%
13.7%
14.0%
n.m
21.6%
664
885
1,027
1,194
12.4%
12.5%
13.0%
13.2%
n.m
515
681
788
915
21.1%
2.0%
-207
1.5%
-381
1.1%
-517
0.9%
-560
n.m
n.m
Source: Capital IQ
Note: Financial figures are at 31 March n.m = not meaningful
Methodology
Key facts:
Page 52

Methodology
Hengdeli: overview
We included Hengdeli Holdings in the sample

as it has emerged as a key player in the luxury
industry.
Key facts:
Founded in 1957, Hengdeli is engaged in the retail,

distribution and wholesale of international brand
watches in Mainland China and Hong Kong.
120
The company has 470 retails outlets, selling watches

from more than 50 internationally renowned brands as
well as middle- to high-end and accessories.
The group has business relationships with the suppliers
of the worlds premier brands, such as Swatch Group,
LVMH Group, Richemont Group, Rolex Group and Kering
Group.
Retail segment contributed approximately 60% to the
companys revenues in 2013.
Wholesale segment, which distributes numerous
world renowned brand watches, contributed about
35% in 2013.
Remaining revenue is attributable to watch repairing and
maintenance business, a packaging and decoration
business, a watch case manufacturing business, a hotel
business and a property management business.
110
100
9 0
80
70
6 0
5 0
J an- 13
Feb - 13
Mar- 13
Apr- 13
May- 13
J ul- 13
Aug- 13
Hengdeli Holdings Limited
Sep- 13
Oct- 13
Nov- 13
Dec- 13
J an- 14
Feb - 14
Mar- 14
Hang Seng Index
Source: Capital IQ

Sales
EBITDA
EBITDA margin
EBIT
EBIT margin
FY12A
FY13A
FY14E
FY15E
FY12AFY15E
CAGR
1,415
1,561
1,743
1,927
10.8%
178
125
167
188
1.9%
12.6%
8.0%
9.6%
9.8%
n.m
164
109
152
172
1.6%
11.6%
7.0%
8.7%
8.9%
n.m
Net profit
100
47
87
99
-0.2%
Capex ratio
Net debt
3.7%
153
0.9%
206
1.4%
-145
1.2%
-140
n.m
n.m
Source: Capital IQ
Note: Financial figures are at 31 December n.m = not meaningful
J un- 13
Page 53
Methodology
Methodology
Page 54
Glossary
Glossary
CAGR: Compound annual growth rate
Capex: Capital expenditure
DCF: Discounted cash flow
EBIT: Earnings before interest and taxes
EBITDA: Earnings before interest, taxes,
depreciation and amortization
EV: Enterprise value
FX: Foreign exchange
FY: Financial year
GDP: Gross domestic product
LTGR: Long-term growth rate
M&A: Mergers and acquisitions
M-commerce: Mobile commerce
NWC: Net working capital
RTW: Ready-to-wear
SOTP: Sum-of-the-parts
WACC: Weighted average cost of capital
YOY: Year-on-year
Contact us
Page 55
Contact us
Daniel Kaplan
Partner, Advisory New York
NYC and Americas Coordinator
daniel.kaplan@ey.com
+1 212 773 7910
Paul Wood
Partner, Advisory Paris
EMEIA and Global Coordinator
paul.wood@fr.ey.com
+33 1 4693 7722
Laurent Bludzien
Partner Switzerland
laurent.bludzien@ch.ey.com
+41 58 286 5677
Andrea Guerzoni
Partner, Transaction Support Milan
EMEIA TAS Leader
+39 02 8066 9707
Hitoshi Sasaki
Consumer Products Leader Japan
sasaki-htsh@shinnihon.or.jp
+81 3 3503 1701
Steve Auyeung
Advisory China
steve.auyeung@cn.ey.com
+ 86 21 2228 8888
Flavie Lacault
Global Coordinator Milan
flavie.lacault@it.ey.com
+39 02 8066 9677
Michael Hasbani
Partner, Advisory Dubai
michael.hasbani@ae.ey.com
+971 4 701 0100
Contact us in
Roberto Bonacina
Director, Lead Advisory Milan
roberto.bonacina@it.ey.com
+39 02 8066 9762
Production outsourcing
Wholesale market
Emerging geographies
Brand perceptions
Digital sales
Controlled distribution
Future of Chinese market

Working capital analyses
Consumer behaviour
Globalisation
Evolution of luxury
Dermocosmetics
Advertising expenses
European demand stabilizing
New market segments
Currency fluctuations
Luxury
Focus on efficiency
Mixed and expanded offerings
Emergence of new luxury markets
Positive outlook
Wealth-creation opportunities
Evolution in attitudes
Premium pricing
European demand stabilizing
Urban middle class
Challenging growth
Premium customers
Longer term urbanization
Strong identity
Culture convergence
Uniqueness and exclusivity
Younger male customers
Infrastructure
Financial factbook
Accelerate your digital presence
Trading multiples
Uniqueness and exclusivity
Cosmetics
Urbanization
Cosmetics in emerging markets
Market dynamics
Revival in US
Lifestyle
Brand management
Experiential marketing
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Challenging Growth in The Luxury and Cosmetics Sector

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Challenging Growth in The Luxury and Cosmetics Sector

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Challenging growth in the luxury

and cosmetics sector

2013 has been a challenging year for the luxury

6 DCF and valuation parameters

The luxury and cosmetics financial factbook 2014

(only Europe is missing). By 2020, it is estimated that more than half of

The luxury and cosmetics financial factbook 2014

Statistics and key facts

The luxury and cosmetics financial factbook 2014

For both the

The luxury and cosmetics financial factbook 2014

Positive future growth will be driven by

DCF and valuation parameters

Advertising expenses and net working

SOTP and segment analyses

DCF and valuation parameters

DCF and valuation

The luxury and cosmetics financial factbook 2014

DCF and valuation parameters

Luxury companies continue to reflect high-potential growth

WACC and LTGR by company

Chow Tai Fook

Market capitalization is based on a one-month average as of 31 March 2014.

The luxury and cosmetics financial factbook 2014

Companies are sorted in

DCF and valuation parameters

The cosmetics sample is characterized by a smaller number of

WACC and long-term growth rate (LTGR) by company

Companies are sorted in

Market capitalization is based on a one-month average as of 31 March 2014.

The luxury and cosmetics financial factbook 2014

DCF and valuation parameters

EY luxury and cosmetics sample:

Chow Tai Fook

Chow Tai Fook

The luxury and cosmetics financial factbook 2014

Chow Tai Fook

Chow Tai Fook

DCF and valuation parameters

Sales of the luxury companies sample are expected to grow an

Expected growth will mainly be driven by:

Michael Kors, Chow Tai Fook, Moncler and Tumi

DCF and valuation

Sales CAGR, FY12AFY15E luxury companies

Chow Tai Fook

Source: Data based on consensus of several brokers reports for

The luxury and cosmetics financial factbook 2014

DCF and valuation parameters

Sales growth expectations for cosmetics players are lower than

Natura and LOccitane significantly

Sales CAGR, FY12AFY15E cosmetic companies

Source: Data based on consensus of several brokers reports for

The luxury and cosmetics financial factbook 2014

Figures for 2013 are estimated or

DCF and valuation parameters

The luxury sample confirmed last years healthy EBITDA

EBITDA remains largely above 20% with some

DCF and valuation

Volume growth (which implies higher SG&A leverage)

Average EBITDA margin, FY12FY15E luxury companies

Source: Data based on consensus of several brokers reports for

*Kering margin for FY12AFY15E excludes numbers for

2013 has been a challenging year for the luxury