For the first time in its 108-year history, Chanel has published financial results. The figures show that it is a luxury giant, but that it shared them at all was a surprise.CreditCreditChristophe Petit Tesson/EPA, via Shutterstock
By Elizabeth Paton - June 21, 2018
LONDON — Synonymous with French high fashion and blockbuster Parisian runway shows, Chanel is one of the biggest brands in the global luxury business. Its outrageous octogenarian creative director and the personal style of its chic female founder are the stuff of legend.
But how much the company makes from global sales of its No. 5 perfume, ready-to-wear collections and array of accessories has been a closely guarded secret, until now.
In a radical about-turn, Chanel — founded by Coco Chanel, an aspiring actress and seamstress, with the opening of a small millinery boutique in Paris in 1910 — released its annual results on Thursday for the first time in its 108-year history. It also announced a reorganization that will bring all its various companies under one roof.
The numbers show that Chanel is among the largest luxury brands in the world by revenues, outpacing rivals like Gucci and neck and neck with Louis Vuitton. Sales growth is strong, and the company is ramping up investment.
The announcements are, however, more important for their symbolism. At a time of heightened competition in high-end retail and of persistent rumors that Chanel could be a takeover target, the storied French fashion house said it had opened up its books to show that it had the size, and the willingness, to fend off any approaches.
“We realized it was time to put the facts on the table as to exactly who we are: a $10 billion company with very strong financials, plus all the means and ammunition at our disposal to remain independent,” Philippe Blondiaux, Chanel’s chief financial officer, said in a telephone interview.
“We recognize that we are often a subject of much speculation and that people don’t have facts to hand, leading to the circulation of false or misleading information,” he added. “It was time to let the strength of our balance sheet speak for itself.”
The figures released on Thursday showed total sales for the 2017 calendar year were $9.62 billion, up 11 percent from the previous year on a constant-currency basis. That growth was primarily driven by sales in the Asia-Pacific region and in Europe, while operating profit came in at $2.69 billion. Net debt stood at $18 million, with free cash flow of $1.63 billion.
Investment in “brand support activities” — such as marketing and advertising spend, fashion shows, and international customer events — was $1.46 billion in 2017, the company said, a 15 percent annual increase, which Mr. Blondiaux said reflected the company’s confidence in upping the stakes when fueling the growth of its luxury empire.
It also announced that it had established a new, London-headquartered holding company, Chanel Limited, as part of efforts to bring all its businesses and 20,000 employees under a single roof and to simplify a legal and organizational structure unchanged since the 1950s. Mr. Blondiaux was named director for Britain this month.
Its newly published numbers compare favorably with those of Louis Vuitton, owned by LVMH Moët Hennessy Louis Vuitton, and Gucci, owned by Kering.
Gucci announced this month that it had sales of 6.2 billion euros, or about $7.1 billion, in 2017, and said it had a long-term goal of reaching €10 billion in sales. Though LVMH does not break out sales by brand, analysts estimate that Louis Vuitton has €8 billion to €10 billion in annual sales.
The figures underscore Chanel’s leading position in the increasingly competitive global luxury market. Appetite for the company’s product — labeled with its trademarked “double C” logo — among both new and longtime customers remains enviable.
Karl Lagerfeld, the creative director at Chanel, has been at the fashion house for more than 30 years, and speculation is rife over a potential successor.CreditChristophe Petit Tesson/EPA, via Shutterstock
“We are very proud of who we are at Chanel and how much we have achieved while always retaining a core vision and creative heritage,” Mr. Blondiaux said. “This will remain the same in 10 years, 50 years — centuries — to come. This is what we want to communicate.”
Still, the inaugural publication of an annual report also comes at a time of flux for the French luxury juggernaut.