Chanel says US growth has slowed in the past six months
Iconic luxury house Chanel’s growth in the US has slowed in the past six months, pointing to a moderation in the biggest luxury market after a multi-year boom.
The world’s second-largest luxury brand by revenue, which is privately owned, is currently growing “in single digits” in the US, with the United States accounting for the majority of sales last year.
“We had a softening in the US, so it’s no different than some of our competitors, from November 2022, and that continued through the first few months of 2023,” Blondiaux said.
Chanel posted record revenue of $17.2 billion in 2022, up 17% from the previous year.
The 113-year-old Parisian company founded by designer Coco Chanel is owned by the Wertheimer family, and chief executive Leena Nair has ruled out an initial public offering, insisting the company will remain privately owned.
Worries about the outlook for the luxury sector after several years of record growth weighed on listed stocks this week, with a mix of profit-taking and concerns about the US outlook.
Shares of world leader LVMH fell 6.8 percent this week, as did those of Gucci owner Kering, while Hermès fell 4.3 percent.
“We have a really strong outlook for 2023, perhaps a more positive outlook than has been reflected in recent days. [during the sell-off]Blondiaux said. “Those were the analysts’ beliefs and how they see the evolution of the industry in 2023, but as far as we are concerned, we are confident in the outlook for the year.”
He added that he did not expect a change in the growth trends of the luxury industry in 2024 and 2025. “We remain positive for the industry, but I would say even more so for Chanel.”
However, luxury sector conferences hosted by Morgan Stanley and HSBC struck a soberer note on the industry’s outlook this week, turning the mood after several years of buoyant growth and record revenue.
“American demand for luxury remains mediocre, especially among the young [and] aspirational consumer,” HSBC analysts wrote on Thursday, noting that “outside the US, there appears to be little cause for concern” and that the recent selloff is “likely unrelated to fundamentals”.
Weakness among these aspiring shoppers is likely to have less of an impact on high-end brands like Chanel than on those that cater to mid-market luxury consumers.
Half of the home’s revenue growth last year was due to price increases, the company said.
Chanel has markedly increased the prices of its core products since the start of the pandemic, reflecting trends in the industry, with some bags now selling for 74 per cent more in the UK than in 2019, according to Jefferies.
“The reality is that we are the most exclusive brand or one of the most exclusive [and] we intend to maintain this positioning. But in the future, the evolution of our prices will depend on two factors: inflation and currency effects,” Blondiaux said.
In China, luxury’s fastest-growing market, Chanel said it is bouncing back with double-digit growth on the mainland after Covid-zero lockdowns late last year brought much of the industry to a standstill in the country.
Chinese tourism, a key driver of luxury sales, is also on the rise again, Chanel said. Sales to Chinese buyers in France last year fell 90% compared to 2019, but in April they recovered to just 14% below pre-pandemic levels in value terms, although traffic was still down in almost half.
“The more affluent part of the Chinese clientele is the one that currently travels,” Blondiaux said. “The most limiting factor today preventing a full return of Chinese consumers to Europe is flight capacity,” he added.