Chanel, one of the world’s leading luxury brands, has revealed a decline in sales in the United States over the past six months, signaling a slowdown in the country’s post-pandemic spending boom. Philippe Blondiaux, Chanel’s CFO, noted that the trend in U.S. sales has weakened since November, after experiencing double-digit growth in 2022. While an exact figure was not provided, this decrease in sales is concerning for the brand.
However, despite the decline in the U.S. market, Chanel has seen a boost in sales among Chinese shoppers both in mainland China and as they resume traveling. This growth in China is actually more than enough to compensate for the temporary softness in the U.S., according to Blondiaux. With 50% of its sales generated in Asia, Chanel’s success in the Chinese market has been a significant factor in maintaining its overall sales.
Although Chanel has not disclosed the proportion of its U.S. sales, competitor companies LVMH and Kering have reported that U.S. sales accounted for 27% and 18% of their revenues in 2022, respectively. This disparity has raised concerns about the U.S. luxury market, leading to a selloff in luxury stocks. European luxury stocks have hit a seven-week low due to investor uncertainty.
Analysts at HSBC have highlighted the ongoing sluggishness in the U.S. market as a key focus for the second quarter, with many luxury brands experiencing stagnant or worsening trends. The rising costs of living and economic uncertainty are factors contributing to younger and more aspirational shoppers in the U.S. holding off on luxury purchases.
However, despite the challenges in the U.S. market, Chanel remains dedicated to investing in the country. The brand has recently opened a new store on Rodeo Drive in Los Angeles and was a sponsor of the Karl Lagerfeld exhibit at the Metropolitan Museum in New York. Additionally, Chanel plans to continue expanding its workforce with a projected 16% increase in headcount this year, particularly in retail networks. The brand’s commitment to the U.S. market is also evident in its decision to expand its global headquarters in London.
While many luxury brands focus on catering to their wealthiest clientele who are less affected by economic turbulence, Chanel is also turning its attention to younger consumers. To support and attract this demographic, the brand is investing in stores and digital tools, such as virtual jewelry try-on experiences. CEO Leena Nair emphasized the importance of understanding the motivations of young consumers, as they tend to buy less but invest in higher quality items.
Chanel, owned by French billionaires Alain Wertheimer and Gerard Wertheimer, reported robust sales of $17.2 billion in 2022, representing a 17% increase on a comparable basis. The brand achieved double-digit growth in all regions and product categories, demonstrating its resilience and ongoing success in the luxury industry. Despite the challenges faced in the U.S. market, Chanel’s strong performance in other regions, particularly in China, ensures its position as a dominant player in luxury fashion.
Useful links:
1. Chanel Official Website
2. Business of Fashion – Articles
