Chanel CFO ‘happy to be wrong’ as luxury group shrugs off pandemic

Chanel is on track to raise revenue “in double digits” this year from pre-pandemic levels and overhaul its margins, in another sign of how the biggest luxury players have pulled off the crisis much sooner than feared.

With this performance, the privately owned French luxury house known for its No. 5 fragrances and quilted bags will confirm its position as one of the strongest brands in the sector, along with LVMH Louis Vuitton and Hermes. they have Benefit Consumers in China and the United States have been pushing luxury handbags and fashion in recent months, prompting investors to send luxury ratings to all-time highs.

“I’ve never been happy to be wrong about the forecast,” Chief Financial Officer Philip Blondieu said in an interview on Tuesday. anticipation That Covid-19 will lead to two difficult years for the sector.

“There has been strong momentum with clients since September or October, and it only accelerated in 2021. We expect sales this year to be 35% through 2020, double numbers higher than in 2019, and we are confident we can rebuild margins very close. to 2020.”

The strong sales growth comes despite the fact that about 10 per cent of its 206 stores worldwide remain closed due to Covid-19 restrictions, down from a peak of 50 stores last year.

Unlike competitors, Chanel sells very little online, so it cannot count on digital revenue during pandemic lockdowns. Beauty products and perfumes are only sold via e-commerce.

Chanel said 2020 revenue fell 18 percent to $10.1 billion on a constant-currency basis, roughly in line with declines at LVMH and Kering, but worse than Hermès. Operating profit fell 41 percent to $2 billion, a steeper decline than the same competitors.

Away from the challenges of the pandemic, Chanel has been in transition since the death of its star designer Karl Lagerfeld in 2019, while he succeeded him as creative director. Virginie Viard Put your stamp on the groups.

Asked about the poor earnings performance, Blundeau said Chanel had invested throughout the crisis and had not cut costs significantly. Nor has it made significant job cuts or relied on government aid, such as vacation schemes.

Capital spending soared to its highest levels last year at $1.1 billion, and nearly half of it was used to “seize opportunities” in real estate, such as buying the Chanel flagship store on London’s Bond Street. The rest went toward upgrading offices and workshops, and technology investments, Blondiaux said, adding that the company will maintain similar levels of capital expenditures this year and next.

The rapid return of Chinese consumers to notable consumption last year helped underline how they remain the sector’s most important growth driver. However, Blondiaux said Chanel wanted to proceed cautiously with expansion into China.

“Luxury is about exclusivity, rarity, and offering unique products,” he said. “In China, we have 15 fashion stores, and we will open more at a relatively moderate pace of one or two a year.

“We want to protect the experience of our existing customers by offering personal and intimate relationships.”

Blondiaux said Chanel was also considering whether to open its first store on China Island Hainan, which has become a luxury and beauty hotspot as the government has pushed for its development as a duty-free shopping mall.

“We are monitoring developments in Hainan very carefully, and we actually sell our perfumes and beauty products there, although there is no fashion or watch presence,” he said.

“The decision may be made this year, but it will take time to find the right place and build the store, so it is unlikely that it will open this year.”

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