Revenue and Operating Profit Decline Simultaneously for the First Time Since 2020
Chanel CFO: "A 3% Price Increase Possible Again This Year"
French luxury brand Chanel saw its operating profit plunge by 30% last year compared to the previous year.
According to the Financial Times (FT) on May 20 (local time), Chanel's revenue last year was $18.7 billion (26.1 trillion won), down 4.3% from the previous year, while operating profit fell by 30% to $4.5 billion (6.3 trillion won). Net profit declined by 28% to $3.4 billion (4.7 trillion won).
This is the first time since 2020, when stores were closed due to the COVID-19 pandemic, that Chanel's annual revenue and operating profit have both declined. Sales in Asia, including China, fell by 7.1% year-on-year to $9.2 billion (12.8 trillion won), contributing to the overall decrease in revenue. The economic downturn in China, the world’s largest luxury market, has led Chinese consumers to tighten their spending.
Chanel CEO Leena Nair said in a statement, "The challenging macroeconomic environment has impacted sales in some markets."
These results were reported before the tariff disruptions triggered by the Donald Trump administration in the United States took effect. Regarding Chanel’s outlook for this year, CEO Nair told the FT, "The environment ahead remains highly uncertain."
Chanel has implemented continuous price increases in recent years. According to analysts at HSBC, the price of the Chanel Classic Flap Bag has more than doubled since 2019, surpassing 10,000 euros (approximately 15.6 million won), which is higher than the average luxury price increase of 50%.
However, Chief Financial Officer (CFO) Philippe Blondiaux refuted claims that price hikes have negatively impacted sales. He stated, "Consumers fully understand that the prices of Chanel products are commensurate with the quality of the premium raw materials used." He also indicated that the average price increase for Chanel’s fashion products last year was 3%, and it is likely to rise at a similar rate this year.
Despite challenges such as the global economic slowdown and declining demand across the luxury sector, Chanel made its largest-ever investment last year. Capital expenditures, including store acquisitions, rose by 43% year-on-year to $1.75 billion (2.4409 trillion won).
Chanel plans to maintain this level of capital expenditure this year. CFO Blondiaux said, "We plan to spend $1.8 billion (2.5106 trillion won) in capital expenditures this year, and in addition, a record $600 million (836.7 billion won) will be allocated for supply chain integration."
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