June 21, 2018 / 12:09 PM / a month ago

Chanel steps out of fashion shadows to show off surging sales

PARIS (Reuters) - French fashion group Chanel published financial results for the first time on Thursday, showing off its credentials as one of the luxury world’s biggest labels by sales as revenue and profit grew strongly in 2017.

FILE PHOTO: A woman walks past a wall with logos of French luxury goods maker Chanel in Nice, France, February 22, 2017. REUTERS/Eric Gaillard/File Photo

The privately-owned company, famed for its tweed suits, cushioned handbags and No5 perfumes, has long intrigued the fashion industry by keeping a close lid on its numbers. It also has a maverick streak, being one of the few brands which refuses to sell its clothes online.

Publishing its results was “absolutely not” a precursor to a stock market listing, Chief Financial Officer Philippe Blondiaux told Reuters. He also ruled out a sale of Chanel - long seen as a covetable label for conglomerates like LVMH (LVMH.PA) or Kering (PRTP.PA) which have a wardrobe full of designer brands.

“It’s exactly the opposite - this financial statement shows that we are amazingly solid financially and we can keep our status as a private, independent company for the next few centuries,” Blondiaux said in an interview.

“Instead of having others report (about us), we’ve decided to put the facts on the table about who we are,” he added, saying the brand, which has long relied on octogenarian Karl Lagerfeld for its womenswear designs, had previously preferred to let its creative officials speak instead.

Chanel posted revenues of $9.62 billion for 2017, an 11 percent rise from a year earlier at constant currencies, helped like its peers by a strong performance in Asia Pacific especially, where sales grew 16.5 percent. Profit rose 18.5 percent from a year earlier to $1.79 billion.

FILE PHOTO: Chanel logo is seen on the company's store in Monte Carlo, Monaco, December 9, 2017. REUTERS/Eric Gaillard/File Photo

The disclosure puts Chanel - thanks in part to a big make-up and fragrance business which some rivals lack - vying for the top position with LVMH’s Louis Vuitton, with estimated sales of over 8 billion euros ($9.2 billion) a year.

Kering’s Italian brand Gucci this month outlined its ambition to overtake Vuitton by eventually hitting 10 billion euros in sales, from 6.2 billion euros ($7.2 billion) last year.

Luxury companies have broadly benefited from a rebound in Chinese consumer demand over the past two years, momentum that has carried into the first quarter for many. But some are struggling more than others to boost sales by capturing younger shoppers for instance.

Chanel’s previous glimpses into its performance, with figures filed with the Amsterdam exchange that only reflected parts of its business, had suggested sales were falling, adding to speculation of a possible takeover.

Blondiaux did not detail earnings prior to 2016, saying only that the business had been in constant progression over the past few years.

“We are optimistic on 2018,” he added.

SUCCESSION QUESTIONS

Chanel, founded in 1910 by Coco Chanel, also unveiled an internal reorganization that consolidates almost all of its activities under a UK registered company and includes some of its other small businesses like swimwear label Eres.

Its filings showed the firm’s secretive owners, French billionaires and brothers Alain and Gerard Wertheimer, who are 69 and 68 respectively, stepped down from the board of the UK-based Chanel Limited in December.

Blondiaux said it was “their decision” not to sit on the board, only adding that Alain Wertheimer remained a very “hands on” chief executive of Chanel and that several other board changes took place as a result of the internal rejig.

Chanel has long been tight-lipped about any plans to replace designer Lagerfeld after 35 years, and Blondiaux said there was no family handover in the works on the management side at present.

The company was investing in technology and in digital services linked to its stores, Blondiaux said, adding spending on this could double from 2017 levels of $429 million.

But while its beauty products can be bought online, fashion collections remain off-limits, even as other brands derive strong growth from e-commerce.

“Even in this digital age we believe human interaction will remain key to the interaction between high-end customers and a brand like Chanel,” Blondiaux said.

Reporting by Sarah White and Pascale Denis; Editing by Mark Potter and Elaine Hardcastle

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