French luxury brand Chanel has released its 2023 financial report, revealing double-digit growth in sales and profits driven by price increases and strong demand for fashion and handbags.
According to data published by Chanel Ltd., sales grew by 16% on a comparable basis to $19.7 billion in 2023, with operating profit reaching $6.4 billion.
In an interview with Bloomberg, Chanel’s Chief Financial Officer Philippe Blondiaux stated that 9% of the sales growth in 2023 came from pricing, and 7% from volume growth. As one of the top luxury brands, Chanel has increased prices multiple times, resulting in the price of a medium Classic Flap Bag in France exceeding €10,000.
By region, the Asia-Pacific market led the growth in 2023, contributing more than half of the total sales. The European market saw double-digit sales growth, while the Americas performed the weakest, with sales up by only 2.4% due to inflation dampening demand among aspirational customers. Blondiaux noted that the demand situation in the U.S. has been challenging for the past 18 months but hopes that rising stock markets and improving macroeconomic conditions will drive a rebound.
The company’s workforce grew by 14% in 2023, totaling around 36,500 employees.
Blondiaux also highlighted that since Virginie Viard became the brand’s Artistic Director of Fashion in 2019, Chanel’s fashion business has more than doubled, especially the ready-to-wear segment. “The happiest person in the world to have Virginie Viard as a designer is Chanel’s Chief Financial Officer.”
Chanel’s CEO Leena Nair added that customers love the silhouette and fit of Viard’s creations.
A company document shows a proposed final dividend of £4.5 billion ($5.7 billion) for 2023. In 2021, the total dividends distributed amounted to $5 billion.
Regarding future plans, Blondiaux revealed that the brand will make “more significant investments in real estate” this year, targeting cities like New York, Paris, and secondary cities. As of now, Chanel’s global real estate portfolio is valued at over $7 billion.
Leena Nair also noted that despite Chinese consumers resuming overseas spending post-global travel recovery, the brand still plans to invest and open more stores in the Chinese Mainland. “The ability to scale is quite important.” She shared observations from a recent trip to China: young Chinese consumers are interested in buying luxury goods as a long-term financial investment.
Blondiaux remarked, “The growth driven by Chinese consumers is happening more in Europe and Japan, with much less in mainland China. In recent weeks, nearly half of Japan’s sales have come from Chinese tourists.”
In the interview, Blondiaux also indicated that further price increases might be expected in the second half of the year to accommodate rising material costs and exchange rate differences. In late March, the brand had already increased handbag prices globally, with prices for the Classic Flap Bag on the U.S. website recently rising by 6-8%, with all Classic 11.12 bags now priced over $10,000.
However, he mentioned, “I want to say that we are still unevenly distributed in the Chinese market.” He further explained that the brand currently has 18 fashion boutiques in China, while competitor brands have around 40-50 stores. In the coming months, Chanel will open a store in Shanghai equipped with a private salon and repair center.
According to Luxe.CO Intelligence, a subsidiary of Luxe.CO, Chanel’s boutique in Chengdu SKP opened earlier this month, and the store in Shenyang MixC is under preparation.
Although specific data was not disclosed, Chanel will invest more in marketing and advertising this year, though the proportion of sales will be lower than last year.
To support the above strategy, the brand has increased its capital expenditure to $1.8 billion this year, up from $1.2 billion in 2023.
Additionally, Blondiaux stated that they do not expect the Paris Olympics and Paralympics (opening on July 26) to boost brand performance. “Considering the traffic issues in Paris and its surroundings, we do not have high hopes for sales during this period.”
| Source: Bloomberg, Reuters
| Image Credit: Brand official website
| Editor: LeZhi
