Chanel’s Sales Bounce Back Following Heavy Pandemic Hit

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Chanel’s revenue fell by 18 percent last year to $10.1 billion, the French luxury giant said Tuesday, citing a business climate that was “highly disrupted” by store closures and the suspension of international travel during the Covid-19 pandemic.

The downturn in Chanel’s business was steeper than the declines suffered by top luxury rivals including LVMH, whose fashion division was propped up by persistent consumer appetite for its biggest Louis Vuitton and Christian Dior labels, and accessories-focused Hermès, where demand continued to exceed production capacity for its flagship Birkin and Kelly handbags.

The tumultuous year came as Chanel seeks to write a new chapter following the loss of its creative chief of over 35 years, Karl Lagerfeld, in 2019. The company’s operating profit fell by 41 percent to $2 billion in 2020.

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But the brand has been quick to bounce back: sales have returned to growth, with revenue rising by a double-digit percentage over 2019′s pre-pandemic levels during the first five months of 2021, chief financial officer Philippe Blondiaux told Business of Fashion in a phone interview.

“Since September 2020 we’ve seen a fantastic momentum, which further accelerated this year,” Blondiaux said.

The deeper slump than rivals is best explained by a heavy exposure to perfume and cosmetics, categories that are highly exposed to the travel retail channel, which has collapsed during the pandemic. Chanel’s perfumes like No.5 , Chance, and Gabrielle occupy some of the most prominent placements in airports.

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A refusal to sell its core fashion and accessories products online also meant leaving money on the table, with international travel suspended and stores in many markets required to close.

The share of luxury purchases made online nearly doubled from 12 percent in 2019 to 23 percent in 2020, according to consultancy Bain. While Chanel’s online sales of perfume, cosmetics, and eyewear more than doubled last year, Blondiaux said, the brand is staying firm in its position to keep its fashion offline.

“A sale that becomes completely dematerialised and depersonalised is the opposite fo the experience we want to create,” Blondiaux said. “Our boutiques and our fashion advisors are central to our strategy. That’s why we haven’t been, and why we will not be, selling online.”

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Chanel is investing in digital tools for store associates to make distance sales, however: including chat apps to stay in touch with clients, video fitting and styling appointments, and shipping from the store to clients’ homes.

The company also ratcheted up capital spending to a record high of $1.1 billion, investing in real estate purchases (such as the brand’s stores in London’s Bond Street and France’s St. Tropez), acquisitions to vertically integrate its supply chain (including a tannery), and investments aimed at hitting the brand’s sustainability targets.

The statement marked just the fourth time the brand has disclosed its annual sales in its 110-year history.

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Chanel moved its legal and financial headquarters to London in 2017 and started reporting consolidated figures there. The pivot to greater transparency sparked speculation that its owners, the secretive Wertheimer brothers, were preparing for a sale or public-offering.

It’s a possibility the company continues to deny: “We will not be participating in any possible consolidation fo the luxury industry, neither as a target nor as an acquirer of other brands,” Blondiaux said.

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