Chanel, the iconic fashion house, is set to make a remarkable comeback in 2021 after facing significant obstacles brought on by the global pandemic in 2020. The company’s Chief Financial Officer, Philippe Blondiaux, recently announced that they are expecting a double-digit increase in sales this year compared to 2019, which was considered a “normal” year. Despite the challenging circumstances of 2020, Chanel managed to generate an operating profit of $2.049 billion, albeit a decline of 41.4% compared to the previous year. In terms of total sales, the company experienced an 18% decrease, amounting to $10.1 billion. While this decline was relatively good considering the temporary closure of stores and lockdown measures worldwide, Chanel did face a slightly steeper drop compared to some of its ultra-luxury competitors.
Blondiaux attributes Chanel’s current strong growth, particularly in China and the US, to a combination of pent-up demand and a lasting momentum that was built by brands like Chanel, who continued to invest in their products and marketing during the challenging times of 2020. This recovery has been evident across various segments of Chanel, including fashion, fine jewelry, watches, and skincare, which performed well despite the negative impact on fragrance and makeup sales due to reduced airport shopping. Chanel’s ability to bounce back can be credited to their continuous investment in the brand, which helped them stay top-of-mind for consumers. The company recorded a record level of capital expenditure, representing 11.1% of sales, highlighting their dedication to long-term value creation.
Recognizing the changing retail landscape, Chanel embraced online opportunities, particularly in the beauty sector. Online beauty sales more than doubled in 2020 and have continued to grow by almost 60% in 2021. Additionally, the company developed virtual sessions and launched an app in May 2020 to facilitate personalized shopping and concierge services for their luxury customers. Although fashion sales were heavily influenced by the pandemic, Chanel experienced significant growth in this category prior to the crisis, showcasing the desirability of Virginie Viard’s collections. The Watches and Fine Jewelry segment also displayed resilience with double-digit revenue growth, driven by the success of Precious Jewelry’s Coco Crush and the Coco Slim Ring release.
Chanel’s commitment to retail expansion and enhancement was evident through various significant developments. The company acquired its flagship store on London’s New Bond Street, reconstructed the Fashion and Watches and Fine Jewelry boutique in Beverly Hills (set to open in 2022), and expanded its Fragrance & Beauty standalone boutiques network. Furthermore, Chanel embarked on the construction of the 19M complex in Paris – Aubervilliers, a five-story establishment that aims to bring together artisans with exceptional skills to preserve and showcase the Métiers d’Art. The company also made strides in its sustainability efforts, reducing emissions and increasing the share of electricity from renewable sources to 70%, compared to 50% in 2019.
Overall, Chanel has successfully navigated the challenges posed by 2020 and is primed for a strong recovery in 2021. Their strategic investments, resilience, and adaptability have positioned them well for future success in the luxury fashion industry.
Useful links:
Vogue Business: Chanel predicts strong sales comeback
Business of Fashion: Chanel Sales Fall 18% in 2020, Profits Down 41%
