June 17, 2019 / 12:26 PM / in a month

Fashion house Chanel parades its independence as profits rise

PARIS (Reuters) - Luxury fashion group Chanel, whose star designer Karl Lagerfeld passed away in February, on Monday reaffirmed commitment to its independence after reporting higher annual sales and profits.

FILE PHOTO: A model presents a creation during the Cruise 2020 collection show for French fashion house Chanel at the Grand Palais in Paris, France, May 3, 2019. REUTERS/Gonzalo Fuentes/File Photo

The French company’s move last year to publish financial results for the first time since it was founded in 1910 by Coco Chanel has fueled speculation about a sale.

But Chanel’s Chief Financial Officer Philippe Blondiaux told Reuters on Monday: “In the most solemn and firm way that no IPO or sale is planned.”

“We’ve got to live with the fact that we are one of the most desirable brands in the market. These rumors will unfortunately keep coming back on a regular basis,” Blondiaux said.

“Chanel needs to remain independent, in order to have the freedom to make choices that go against the grain, such as no longer using exotic animal skins, or by harmonizing prices.”

He said independence also helped Chanel to keep its fast pace of investment mainly on its store network, its tech projects and acquisitions such as Spanish company Colomer.

The company has more than doubled such investments to $1 billion in 2018 from a year earlier and will invest at least the same amount in 2019, Blondiaux said.

Chanel, known for its tweed suits, quilted handbags and No.5 perfume, said its 2018 revenues rose 13% to $11.12 billion, while net profits climbed 16% to $2.17 billion.

Strong demand from wealthy Chinese consumers at home and overseas has continued to drive higher sales and profits for big luxury companies in spite of a trade dispute between the United States and China.

POTENTIAL SUITORS

In May, Chanel’s new creative chief Virginie Viard delivered her first solo collection for the brand in the wake of Lagerfeld’s death. Blondiaux said Chanel saw Viard as being with the group for the long term.

Analysts have touted rival LVMH as a possible suitor for Chanel, but LVMH CFO Jean-Jacques Guiony said earlier this month its size would be a challenge for any buyer.

Chanel’s sales growth in 2018 was slower than the 19% increase reported by Louis Vuitton and the 33% jump reported by Gucci.

Last year, Chanel enjoyed growth across all of its markets, led by Asia-Pacific where sales rose 19.9%, compared to a 7.8% rise in Europe and 7.4% in the Americas region.

Unlike rivals, who have moved into online sales, Chanel prefers to sell mainly via its network of shops.

“Our position remains the same and will not change. We keep on thinking physical contact in our shops is essential,” Blondiaux said.

The fashion house does however invest in digital services for customers and does sell cosmetics and perfumes on-line. Online revenues rose more than 50% in 2018.

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

There is speculation about who will take over at the top from Chanel’s owners, French billionaire brothers Alain and Gerard Wertheimer. Alain Wertheimer, 70, is currently the group’s global CEO.

“Like any company, Chanel is preparing a succession plan in the long term. But there is no rush and no need at this time. Alain Wertheimer is in excellent shape,” the CFO said.

The company said it paid the Wertheimer family $842 million in dividends in 2018.

Reporting by Pascale Denis; Editing by Inti Landauro/Sudip Kar-Gupta/Susan Fenton/Jane Merriman

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