Growth for iconic luxury brand Chanel has slowed in the U.S. over the past six months, pointing to a slowdown in the biggest luxury market after years of prosperity.
The world’s second-largest luxury brand by revenue, which is privately held, is now growing in the “single digits” in the U.S., after rising nearly 10% in the Americas, chief financial officer Philippe Blondiaux told the Financial Times – U.S. accounted for the majority of sales – last year.
“From November 2022, we have slowed down in the U.S., so we are no different than some of our competitors, and that continues into the first months of 2023,” Blondiaux said.
Chanel’s revenue will hit a record $17.2 billion in 2022, a year-over-year increase of 17%.
The 113-year-old Parisian company founded by designer Coco Chanel is owned by the Wertheimer family and chief executive Leena Nair has ruled out an IPO, insisting it will remain private.
Concerns about the outlook for the luxury sector hit listed stocks this week after years of unprecedented growth, with profit-taking and worries about the U.S. outlook wiping out more than $60 billion in value from the sector in two days.
Shares in global leader LVMH fell 6.8 percent this week, as did Gucci parent Kering, while Hermès fell 4.3 percent.
“We maintain a very strong view on the outlook for 2023, probably more optimistic than what has been reflected in the past few days (during the sell-off),” Blondiaux said. , but as far as we are concerned, we are very confident about the outlook for this year.”
He added that he does not expect growth trends in the luxury industry to change in 2024 and 2025. “We’re still optimistic about the industry, but I think Chanel is more so.”
Morgan Stanley and HSBC offered a more sober view of the industry’s outlook at a luxury industry conference this week, however, after several years of strong growth and record revenues, sentiment has shifted change.
“Demand for luxury goods in the U.S. remains subdued, especially among young (and) aspiring consumers,” HSBC analysts wrote Thursday.
The weakness among these aspiring buyers may affect premium brands such as Chanel less than those that cater to more mid-market luxury consumers.
Half of the company’s revenue growth last year was due to higher prices, the company said.
Chanel has significantly raised prices on its core products since the start of the pandemic, mirroring trends across the industry, with some handbags selling for 74% more in the UK than in 2019, according to Jefferies.
“The reality is we are the most exclusive or one of the most exclusive brands (and) we intend to maintain that position. But going forward, the evolution of our prices will depend on two factors: inflation and currency effects,” Blondiaux said.
In China, the largest growth market for luxury goods, Chanel said it was posting double-digit growth in mainland China after a zero-Covid lockdown late last year brought much of the country’s industry to a near standstill.
Chanel said Chinese tourism, a key driver of luxury sales, was also on the rise again. Sales to Chinese buyers in France fell 90% last year compared with 2019, but by April this year had rebounded to a value just 14% below pre-pandemic levels – although foot traffic was still nearly halved .
“The wealthiest segment of the Chinese clientele is the clientele who are currently traveling,” Blondiaux said. “The biggest constraint currently preventing Chinese consumers from fully returning to Europe is flight capacity,” he added.