The crisis caused by the Covid-19 pandemic is weighing heavily on the luxury sector. Philippe Blondiaux, Chief Financial Officer of Chanel estimates that the company’s turnover and profits will be affected over the whole of 2020.
“We expect the external environment to continue to weigh negatively on the luxury sector over the next 18 to 24 months,” Philippe Blondiaux told Reuters.
Chanel reported on Thursday a 13% growth, on a comparable basis, of its sales in 2019, to 12.3 billion dollars (10.96 billion euros), and an operating profit up 16.6%.
The company is benefiting from the reopening of 85% of its stores following the lifting of containment measures. According to the Chief Financial Officer, these reopenings have enabled sales to grow, with triple-digit growth in China and double-digit growth in Paris, Milan and Berlin.
“This very good performance with local customers will be insufficient to compensate for the lack of international trade, foreign visitors and the fact that our duty-free sales (…) are still largely non-existent,” he added.
According to the consulting firm Bain, the luxury sector, whose turnover is estimated at 310 billion dollars, could see a decline this year that could represent up to 35% of its sales.
The famous luxury group, which has only been publishing its results for the past two years, expects to make a profit this year despite the crisis.
Philippe Blondiaux maintains that the relative strength of the results published this Thursday reflects a “successful” and “smooth” transition between the former artistic director Karl Lagerfeld, who died in February 2019, and Virginie Viard who succeeded him. Indeed the latter has seduced a large public with her ready-to-wear collection, increasing the turnover of the collection by 28%.
However, the house of Chanel has been forced to take steps to get through this period of crisis calmly. To this end, it has reduced its advertising expenditure by more than a quarter, adjusted its production and cancelled certain events, including the fashion show scheduled for Capri in May. For the rest, the group seems to be favouring events on the Internet.
In addition, the house will suspend the payment of dividends for this year, of which the Wertheimer brothers, the group’s owners, are the main beneficiaries.
Moreover, the company has made it known that, unlike its competitors whose sales strategy is shifting towards Internet commerce, it remains attached to its distribution model on its boutique network.
“We have no intention, crisis or not, of selling fashion, watches and fine jewellery online,” said Philippe Blondiaux.
While the brand favours a more exclusive customer service at the point of sale for the majority of its pieces, it nevertheless uses online commerce for its ranges of perfumery, cosmetics and small accessories. Sales via this distribution method have moreover increased by 60% in periods of containment.
Featured photo : © Chanel