Growth of iconic US luxury house Chanel has slowed in the past six months, signaling a moderation in the largest luxury market after booming for several years.
After growing by nearly 10 percent in the Americas – where the US accounts for the majority of sales – last year, it grew by about 10 percent, chief financial officer Philippe Blondeau told the Financial Times.
“We had softening up in the US, so it’s no different than some of our competitors, starting in November 2022, and continuing through the first few months of 2023,” Blondiaux said.
Chanel posted record revenues of $17.2 billion in 2022, up 17 percent year-on-year.
The 113-year-old Parisian company founded by designer Coco Chanel is owned by the Wertheimer family, and CEO Lina Nair has ruled out an initial public offering, insisting the company will remain privately owned.
Concerns about the outlook for the luxury sector after several years of unprecedented growth hit listed stocks this week, with a mixture of profit-taking and worries about the future of the United States wiping out more than $60 billion from the sector’s value in two days. .
Global leader LVMH is down 6.8 percent this week as is Kering, owner of Gucci, while Hermès is down 4.3 percent.
“We maintain a really strong outlook for 2023, perhaps a more positive outlook than what has been reflected over the last few days.” [during the sell-off]Blondeau said. “These have been the beliefs of analysts and how they see the development of the industry in 2023, but as far as we are concerned, we are confident in the outlook for the year.”
He added that he does not expect a change in growth trends in the luxury industry in 2024 and 2025. “We remain positive for the industry, but I would say more than that for Chanel.”
Luxury sector conferences by Morgan Stanley and HSBC struck a more sober note on the industry outlook this week, however, changing the mood after several years of buoyant growth and record revenue.
US welfare demand remains weak, particularly with young people [and] The ambitious consumer,” HSBC analysts wrote on Thursday, while noting that “outside the US, there appears to be no cause for concern” and that the recent sell-off is “likely unrelated to fundamentals”.
The weakness among these aspiring buyers is likely to have less impact on high-end brands like Chanel than it does for those who cater to mid-market luxury consumers.
The company said that half of last year’s home revenue growth was due to price increases.
Chanel has raised the prices of its staples significantly since the start of the pandemic, mirroring trends across the industry, with some handbags now selling 74 percent more in the UK than in 2019, according to Jefferies.
“The truth is that we are the most unique or one of the most unique brands [and] We intend to maintain this status. But in the future, the evolution of our prices will depend on two factors: inflation and currency effects,” Blundeau said.
In China, the biggest growth market for luxury, Chanel said it was recovering with double-digit growth on the mainland after zero Covid lockdowns at the end of last year brought much of the country’s industry to a standstill.
Chanel said Chinese tourism, a major driver of luxury sales, is on the rise again. Sales to Chinese buyers in France last year fell 90 per cent from 2019, but by April they had rebounded to just 14 per cent below pre-pandemic levels in terms of value – even though traffic was still lacking. Still down by about half.
“The wealthier part of the Chinese clientele is the part that is currently traveling,” said Blondieu. “The most limiting factor today preventing a full return of Chinese consumers to Europe is flight capacity,” he added.