Chanel endures tough 2020 but recovery is on track
Chanel expects to be riding high again this year after a tough 2020, with sales forecast to rise in double-digits compared to the last ‘normal’ year (2019). That’s according to the company’s CFO on Tuesday after it released its pandemic-hit 2020 figures.
The privately-owned group has been sharing more financial details than it used to in recent years and said that 2020’s operating profit was $2.049 billion, down 41.4% compared to 2019. Total sales for the year fell 18% currency-neutral to $10.1 billion, which wasn’t a bad result in the light of so many temporary store closures and global lockdowns. However, the decline was a bit worse than had been seen at some of its ultra-luxury peers.
But CFO Philippe Blondiaux told Reuters that the firm is currently growing in double-digits and sees nothing that’s likely to change this trend with China and the US particularly strong.
And while he said there’s been a certain amount of “revenge buying” due to pent-up demand, he also “believe it's a deep and lasting momentum” that’s being seen at those big names (such as Chanel) that continued to invest in their brands during the tough times last year.
The recovery since last autumn has also been broadly-based with fashion, fine jewellery and watches all doing well, as is skincare, which clearly helped counter the impact on fragrance and make-up of less airport shopping.
Looking at the full-year results, it’s undeniable that the company suffered last year — a factor exacerbated by the fact that it doesn’t sell much of its offer (fashion, watches and fine jewellery) online.
Yet the ongoing investment Blondiaux referred to meant the brand stayed front-of-mind for many clients. It saw a record level of capital expenditure at $1.12 billion, representing 11.1% of sales, “demonstrating Chanel’s commitment to long-term value creation and confidence in the company’s financial strength”, the results statement said.
It maintained virtual sessions between its sales staff and customers, for instance, rapidly developing an app that launched in May 2020. This helped facilitate personal shopping and concierge services for luxury shoppers.
And it made the most of online opportunities for beauty. Online beauty sales more than doubled last year and are up close to 60% this year.
The word it used most about 2020 was “resilient”, yet despite the resilience, sales trends in fashion “were heavily influenced by the Covid-19 pandemic”. Ahead of the onset of the pandemic in early 2020, fashion sales had recorded double-digit growth in all categories, “attesting to the strong desirability of Virginie Viard’s collections”. Trading was subsequently “significantly impacted by Covid-19-related restrictions”. But it seems that the current upwards trajectory means that the company isn't suffering any lasting impact of changing consumer tastes.
And the Watches and Fine Jewellery segment also proved “resilient, thanks notably to the dynamism of Precious Jewellery’s Coco Crush that confirmed its icon status through double-digit revenue growth, supported by the release of Coco Slim Ring”.
Chanel also continued to invest heavily in its retail distribution, “as confirmed by the acquisition of its London New Bond Street flagship in October 2020, the complete reconstruction of the Fashion and Watches and Fine Jewellery boutique in Beverly Hills (which will open in 2022) and the continuous expansion of our Fragrance & Beauty standalone boutiques network”.
Another landmark in the year was the construction of the 19M in Paris - Aubervilliers, a five-storey complex “where 600 artisans with exceptional know-how will work together, to preserve, develop and give visibility to the savoir-faire of the Métiers d’Art”.
It also progressed it sustainability goals with a decrease in emissions and 70% of electricity coming from renewable sources (vs 50% in 2019).
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