Chanel's Sales Slid 4%, Forcing the House To Ease off of Price Hikes
Summary
Chanel's sales have taken a fall for the first time since 2020, sliding 4.3% to $18.7 billion USD last year. The French luxury company saw operating profits decline 30% to $4.5 billion USD and with the slowdown, Chanel is now re-evaluating its price hikes. Previously gung ho about increased prices on its products, specifically its classic handbags, Chanel is expected to ease off of the price increases as well as investments into new markets like India, Mexico and Canada.
BOFhas reported that CEO Leena Nair and CFO Philippe Blondiaux spoke about the 'challenging' luxury market as it tries to revamp its image under new creative directorMatthieu Blazy. According to Blondiaux, the decline in sales still puts Chanel in a 'very health level' as it gears up for a rebrand under the artistic direction of Blazy. Nair said, 'This performance followed a period of unprecedented growth in which revenues nearly doubled over the previous three years. It's a challenging time in the world…and it continues to be challenging.'
Chanel still plans on opening 48 new boutiques this year. Nair said, 'We remain committed to our investments because we always take a long-term approach. We've navigated many ebbs and flows in these 100 years that we've been around, and we're using this moment always to focus, to double down on what makes us uniquely 'Chanel.'' The decline in sales have been largely in due to the lag in leather goods. While other sectors like watches and fine jewellery have seen a 'dynamic growth,' Chanel relies heavily on its leather goods category. Over the years, Chanel's sharp price hikes have been criticized by consumers for its steep incline that saw its iconic medium Flap handbags nearly double its price in 2019. The company has agree to pull back on the price increases with Blondiaux stating, 'The average pricing effect we had for fashion was 3% last year, which I'm sure you will agree was perfectly in line with global inflation, if not less than that. We intend to maintain more or less the same policy, which is to monitor our prices in line with global inflation in 2025.'
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