Finance chief Chanel ‘happy to be wrong’ as luxury group scrapped by pandemic

Chanel is on track to raise “double-digit” revenues this year compared to pre-pandemic levels and repair its margins, in another sign of how the biggest luxury players have shaken the crisis long before that. and fear.

With such a performance, the French private luxury house known for its Number 5 perfume and its quilted bags would confirm its status as one of the strongest brands in the sector, next to LVMH. Louis Vuitton and Hermès. They had benefit since consumers in China and the United States have wallowed in high-quality bags and fashion in recent months, encouraging investors to send luxury valuations to all-time highs.

“I have never been so happy to be wrong about a forecast,” CFO Philippe Blondiaux said in an interview Tuesday, referring to his previous forecast which Covid-19 will lead to two difficult years for the sector.

“There has been a strong push with customers since September or October, and it has only accelerated in 2021. We expect sales this year to be 35 per cent by 2020, and double-digit above 2019, and we are confident that we can rebuild margins very close to 2020 ”.

Strong sales growth comes despite the fact that about 10 percent of its 206 stores worldwide remain closed due to Covid-19 restrictions, up from a peak of 50 stores last year.

Unlike its competitors, Chanel sells very little online, so you couldn’t count on digital revenues during pandemic closures. Only their beauty products and fragrances are sold via e-commerce.

Chanel said 2020 revenues fell 18 percent to $ 10.1 billion on a comparable basis to constant currencies, roughly in line with the fall in LVMH and Kering, but worse than Hermès. Operating profit fell 41 percent to $ 2 billion, a slower slide than those of rivals themselves.

Beyond the challenges of the pandemic, Chanel is in a transition since the death of its star designer Karl Lagerfeld in 2019, while its successor as creative director Virginie Viard puts its mark on collections.

Asked about the profit underpinnings, Blondiaux said Chanel has invested in the entire crisis and has not reduced costs dramatically. Neither had he made deep cuts to jobs or relied on government aid, such as furlough schemes.

Capital expenditures rose to their highest level last year at $ 1.1 billion, with about half of those used to “seize opportunities” in real estate, as bought by Chanel’s flagship store in Bond Street in London. The rest went toward office and workshop upgrades, and technology investments, Blondiaux said, adding that the company maintains similar levels of capex this year and next.

The rapid return of Chinese consumers to overt consumption last year has served to confirm how they remain the industry’s most important growth driver. Yet Blondiaux said Chanel wanted to proceed carefully with the expansion in China.

“Luxury is about exclusivity and scarcity and offers unique products,” he said. “In China, we have 15 fashion stores, and we’re going to open more at a relatively moderate rate of one or two a year.

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

Blondiaux said Chanel was also looking into opening its first store on the Chinese island of Hainan, which became a point of luxury and beauty while the government promoted it for its development as a duty-free shopping center.

“We look very closely at developments in Hainan, and we already sell our perfumes and beauty products here, even if we do not have a presence for fashion or watches,” she 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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