The luxury industry is preparing for the long-term impact of the coronavirus pandemic, and Chanel’s chief financial officer, Philippe Blondiaux, predicts that the sector will continue to be affected for the next 18 to 24 months. Blondiaux stated that the crisis will significantly impact Chanel’s 2020 revenues and profit. Known for its iconic products such as tweed suits, quilted handbags, and No.5 perfume, Chanel is one of the leading luxury brands in the world.

Although specific details of Chanel’s sales decline have not been disclosed, Blondiaux highlighted that the next 12 to 18 months will be particularly challenging. While the reopening of stores in certain countries has led to a strong recovery in sales, the absence of international travel remains a major obstacle. The lack of international business, international visitors, and the continued closure of duty-free business hinder the company’s revenue potential.

Consultancy firm Bain predicts a sales decline of up to 35% in the luxury goods sector this year, totaling $310 billion. Despite the challenging circumstances, Chanel aims to turn a profit in 2020. To mitigate the impact, the fashion house has implemented cost-cutting measures, reducing advertising and promotions by over a quarter. Chanel has also adapted its events, including fashion shows, by pivoting to online experiences.

Chanel has made adjustments to its pricing strategy, including price increases on certain products like handbags due to rising raw material costs. Additionally, the company has decided to forgo dividend payments for 2020, benefiting its billionaire owners, the Wertheimer brothers. Blondiaux reassured that there are no plans to change Chanel’s ownership or leadership and confirmed that the group’s global CEO, Alain Wertheimer, remains in good health.

In contrast to its competitors, Chanel has been cautious about embracing online sales, as it believes its clients prefer a more exclusive and personal approach. Blondiaux emphasized that the company will continue to sell primarily through its physical stores, even during the pandemic. However, Chanel has seen a growth in e-commerce sales for cosmetics, perfumes, and small accessories, increasing by 60% compared to 2019.

In 2019, Chanel achieved revenues of $12.3 billion, with an operating profit increase of 16.6%. Blondiaux highlighted these results as an indication of a successful transition from veteran designer Karl Lagerfeld to his successor, Virginie Viard, who now leads the brand’s ready-to-wear collection. Chanel, founded in 1910 by Coco Chanel, started publishing its financial results only two years ago. Blondiaux emphasizes the importance of maintaining a strong balance sheet and capital structure to preserve the brand’s independence.

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