Chanel warns of two difficult years ahead

Worldwide
Published:  22 June, 2020
Credit: Chanel

The French luxury fashion house forecasts two difficult years ahead for the luxury sector due to the coronavirus pandemic.

Privately-owned Chanel has, however, ruled out any discounting and online selling. “We expect that Covid-19 will lead to significant reduction in revenue and profit in 2020 and that the next 18 to 24 months will be difficult for the sector”, Philippe Blondiaux, CEO, Chanel, told Reuters.

Founded by Coco Chanel in 1910 in Paris, the French company, owned by the  Wertheimer family is reported to have recorded an estimated revenue of US$12.3 billion in 2019, with growth up 13% on a comparable basis from 10.5% in 2018, making it the second-biggest luxury brand after LVMH’s Louis Vuitton (US$12.9 billion) and ahead of Kering’s Gucci (US$10.7 billion). Operating profit rose 16.6% to US$3.5 billion in the year.

U.S. consultancy company Bain & Co forecasts the US$310 billion luxury goods sector to see sales fall of up to 35% in 2020. Chanel is allegedly reducing advertising and promotions by over 25%, cutting production, and has cancelled or transformed some events like fashion shows this year, including by streaming them online. Two catwalk shows scheduled for later in 2020 may still go ahead.

As reported by ILM, the French luxury fashion label is also to increase the price of its handbags and other leather accessories as a result of a rise in the cost of raw materials due to the Covid-19 pandemic. Unlike its rivals, Chanel has no plans to develop online sales. “We don’t intend, crisis or no crisis, to sell fashion, watches and fine jewellery online”, said Blondiaux. The label does, however, sell cosmetics, perfumes and some small accessories online, with e-commerce sales in these areas reportedly up 6% so far into 2020, compared with 2019.

Sources: Reuters/Financial Times