Chanel has struck an optimistic tone as resilient growth across Asia and the US helps the French luxury house offset the hit from lockdowns in China
As with rival upmarket fashion houses, Chanel has been grappling with the lingering effects of the pandemic and stringent citywide lockdowns in China this year, the luxury industry’s biggest market.
Roughly a third of Chanel’s 16 clothing stores and about 100 cosmetics stores in China are closed. Its revenue in the country fell more than 10 per cent in April alone, chief financial officer Philippe Blondiaux said on Tuesday. But that had been offset by “double-digit growth” worldwide in the same month, he added.
“In spite of the difficulties in China, which is an important market for us and for luxury companies, we can be confident,” Blondiaux told the Financial Times.
Blondiaux made his comments as Chanel posted record sales of $15.6bn for the year to the end of December 2021. The group benefited as demand for high-end fashion and accessories roared back to life after Covid-19 restrictions eased, helping it erase the revenue decline that marked the start of the pandemic.
Sales growth at the unlisted French brand even outpaced that of major rivals such as Louis Vuitton owner LVMH, with a rise in comparable revenues of nearly 50 per cent from 2020 levels. Its operating profit hit a record $5.5bn, more than double versus a year ago and up 58 per cent from 2019, it said in a yearly update.
Its revival was less marked in Europe, however, where sales were still down 11 per cent compared with 2019, highlighting the group’s reliance on the US and China for growth. US sales were up nearly 80 per cent year on year to $3.5bn.
“In spite of the numerous headwinds and uncertainties we are facing [this year], I think we’ve maintained our momentum so far,” Blondiaux said. He added Chanel was monitoring stock market wobbles in the US and watching for any signs of a recession there, but had so far seen no impact and was positive about the North American market for 2022.
Chinese consumers are the biggest buyers of luxury globally and have been the sector’s main growth engine, but the impact of strict lockdowns in the country have prompted concerns.
Cartier owner Richemont last week warned about the lasting effects of the lockdowns, saying the Chinese economy may take a while to recover.
But Blondiaux was more confident about a bounceback, as markets such as South Korea, Taiwan, Singapore and Thailand were helping to make up for the sales downturn in China. Chanel does not sell its fashion products online — one of few luxury brands not to do so — but was reaching out to customers individually in China to arrange deliveries in some cases, Blondiaux added.
Like its peers, Chanel has paused its operations in Russia in response to the invasion of Ukraine. Though it has only 17 stores in the country and derived roughly 1.5 per cent of sales from Russia, Chanel has long attracted a Russian clientele, and the brand used to invite its top clients from the country to its Paris fashion shows.
Last month it attracted ire from several Russian models and influencers, who filmed themselves cutting up Chanel handbags worth several thousands of dollars in protest at its policy of restricting sales of products that might be used in Russia, even at overseas stores.
Some accused the brand of Russophobia but Chanel has said its policy is in accordance with EU sanctions. Blondiaux described the backlash as “temporary”, adding that the company had been trying to help clients overcome any problems with customs as a result of its policy.