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Yahoo
20-05-2025
- Business
- Yahoo
Chanel to keep investing despite choppy luxury market
By Mimosa Spencer PARIS (Reuters) -French luxury group Chanel will continue to invest heavily this year, drawing on its deep pockets as other sector players pull back, with plans for new stores in China and the United States, despite volatility in both markets, it said on Tuesday. "We continue to navigate in very uncertain times," group finance chief Philippe Blondiaux told Reuters. He flagged "positive signs of stabilisation" in China and Hong Kong, but said it was still "too early to say" the region had turned a corner, while ongoing talks on tariffs were causing "a lot of uncertainty." Despite a 4.3% drop in sales last year, the French label, known for its double C logo, quilted leather handbags and No. 5 perfume, said it planned to stick to last year's capital spending level of $1.8 billion, which was a 43% increase from the previous year. It will also invest $600 million in supply chains as it internalises production, including buying shares in a silk supplier in France and a jewellery maker in Italy. Chanel sales for the year ending December 31 reached $18.7 billion, weighed down by a slump in China, while operating profit fell 30%. Chanel plans to add 48 stores this year, nearly half in the U.S. and China, as well as in Mexico, India and Canada. Only six of the new outlets will be fashion stores. "Macroeconomic and geopolitical volatility are unquestionably challenging for business and we've seen these conditions have an impact on sales in some markets," said global CEO Leena Nair. Chanel, which increased prices by around 3% last year to keep up with inflation, may raise them further this year, in line with inflation, Blondiaux said. Higher gold prices may lead to higher price increases for the jewellery range, he added. Nair said that new creative director Matthieu Blazy, who was named in December to replace Virginie Viard, would not introduce menswear - a topic of recurrent speculation. Blazy's appointment comes amid a broad designer reshuffle across the industry, with new names at top brands including Gucci, Dior, Balenciaga and Valentino, as executives seek to reignite sales growth. Chanel is owned by French billionaire brothers Alain Wertheimer and Gerard Wertheimer. Last year, sales at LVMH, the world's biggest luxury group, rose 1%, with U.S. and European markets helping to offset a slump in Asia, while Hermes, which has outpaced rivals, posted nearly 15% growth, with growth in all regions, including Asia. Luxury groups had hoped the U.S. market would help lift the sector out of a slump this year, but uncertainty over tariffs has dashed hopes for a quick bounce-back, with consultancy Bain lowering its sector sales forecast to a likely fall of between 2% and 5% this year. Sign in to access your portfolio
Business of Fashion
14-05-2025
- Business
- Business of Fashion
Luxury Sector Faces More Gloom as Bain Cuts Sales Forecast
Sales of luxury goods worldwide are likely to fall between 2 percent and 5 percent this year, consultancy Bain & Co forecast on Wednesday, sharply downgrading its previous estimate for 0-4 percent growth and signalling further gloom for the sector after 2024's 1 percent drop. Ahead of its closely-watched spring report, Bain said the luxury market was experiencing 'more complex turbulence across multiple axes.' It cited economic pressures and price fatigue over the first three months of the year, and noted shoppers were waiting for new, more creative products from brands. Bain's previous forecast for flat sales to 4 percent growth was issued in November. Top labels including Gucci, Chanel and Dior have appointed new designers as the sector faces its worst downturn in years, with a property crisis weighing on the Chinese market and US shoppers pulling back amid economic uncertainty. The new forecast comes as the industry braces for further economic turbulence following a global flare-up in trade tensions. While the large majority of luxury shoppers polled by the consultancy, 75 percent, said tariffs would not likely cause them to make fewer luxury purchases in the future, around half of those who had already pulled back over the past year said it was due to price increases in the sector. Many luxury brands capitalised on the post-pandemic surge in sales to make their biggest ever price increases in recent years, analysts say. Executives of designer fashion brands had hoped at the start of the year for a US-led turnaround, after improvements over the end-of-year holiday season, but by mid-February signs of weakening demand in the US began to emerge. By Mimosa Spencer and Elisa Anzolin; Edited by Mark Potter Learn more: Inside Luxury's Slowdown Economic headwinds, high prices and a lack of novel design are all weighing on what was previously fashion's most dynamic segment. How severe is the slowdown and how long will it last?
Yahoo
14-05-2025
- Business
- Yahoo
Luxury sector faces more gloom as Bain cuts sales forecast
By Mimosa Spencer and Elisa Anzolin MILAN/PARIS (Reuters) -Sales of luxury goods worldwide are likely to fall between 2% and 5% this year, consultancy Bain & Co forecast on Tuesday, sharply downgrading its previous estimate for 0-4% growth and signalling further gloom for the sector after 2024's 1% drop. Ahead of its closely-watched spring report, Bain said the luxury market was experiencing "more complex turbulence across multiple axes". It cited economic pressures and price fatigue over the first three months of the year, and noted shoppers were waiting for new, more creative products from brands. Bain's previous forecast for flat sales to 4% growth was issued in November. Top labels including Gucci, Chanel and Dior have appointed new designers as the sector faces its worst downturn in years, with a property crisis weighing on the Chinese market and U.S. shoppers pulling back amid economic uncertainty. The new forecast comes as the industry braces for further economic turbulence following a global flare-up in trade tensions. While the large majority of luxury shoppers polled by the consultancy, 75%, said tariffs would not likely cause them to make fewer luxury purchases in the future, around half of those who had already pulled back over the past year said it was due to price increases in the sector. Many luxury brands capitalised on the post-pandemic surge in sales to make their biggest ever price increases in recent years, analysts say. Executives of designer fashion brands had hoped at the start of the year for a U.S.-led turnaround, after improvements over the end-of-year holiday season, but by mid-February signs of weakening demand in the U.S. began to emerge.
Yahoo
02-05-2025
- Business
- Yahoo
LVMH's revival plan for Moet Hennessy pins hopes on big name brands
By Mimosa Spencer and Dominique Patton PARIS (Reuters) -LVMH will focus on its biggest, best known alcohol brands and rein in international ambitions for smaller labels to revive Moet Hennessy, the division's CEO Jean-Jacques Guiony told employees this week in a video reviewed by Reuters. Plans are afoot to shrink the workforce by nearly 13% at the wine and spirits division epitomised by high-end champagne brand Moet and Hennessy cognac. It has for years been a drag on the French luxury behemoth's performance. Revenue has been falling and operating profit plunged by over a third last year. Revamping the drinks business poses a tough challenge while the U.S.-led tariff war rages and consumer appetite in key markets such as the United States and China remains weak. For Alexandre Arnault, the division's deputy CEO and son of LVMH owner Bernard, it may be an opportunity to shine among five siblings lining up for a bigger role in the sprawling conglomerate. "Today, we have too heavy a construction," said Guiony, who served as financial officer for LVMH Group for two decades before moving to Moet Hennessy in February. "We have been planning on purchases for decades ... And most of the time, we've been aiming at developing in many geographies at the same time, which is, in my view, a mistake," added Guiony, flanked by Arnault. Guiony said he would "make some changes" after reviewing the division's brands. The commitment to the larger and best-known labels like Hennessy and Moet & Chandon remains in place -- however, the division houses around 30 brands ranging from top names like Veuve Clicquot champagne to lesser known labels like Volcan de mi Terra tequila and Eminente rum. "We need to focus them much more on where they have a chance to succeed," he said. STAFF REDUCTION Guiony also said that the division's structure had been built for "a much larger size of business", outlining plans to reduce staff numbers to the 2019 level of 8,200 from 9,400 currently. LVMH's job cuts, first reported by French publication La Lettre, would mostly take place through normal staff turnover and retirements, according to Guiony, and by not renewing vacated positions. "I find it very appropriate that the new leadership is looking at cutting costs to support profits - this is the right thing to do," said Luca Solca, analyst with Bernstein, adding the whole sector was currently facing softer consumer demand. Drinks players Remy Cointreau and Brown-Forman cut jobs in the United States at the start of this year, while France's Pernod Ricard, owner of Mumm champagne and Jameson Irish whiskey has reported a slowdown in sales. In current market conditions, growing the business to much higher levels "is not going to happen anytime soon," added Guiony, citing the division's nearly 10% first quarter sales decline and uncertainty surrounding tariffs unleashed by U.S. President Donald Trump in April. "It's particularly bad when (the move on tariff) is being announced and not decided, because when it is announced, you know how to react," he said. "Today we don't know." U.S. tariffs could include a 20% charge on European Union wines and spirits if fully implemented, but Trump earlier last month paused most tariffs for 90 days to give time for trade deals, setting a general 10% duty rate instead. Alexandre Arnault, in the video to staff dismissed talk among some analysts that the division could be hived off altogether. "It's never been a plan of our family, of our group, it's not a plan today," said Arnault.
Yahoo
17-04-2025
- Business
- Yahoo
Hermes sales up 7% in first quarter, slightly missing expectations
By Mimosa Spencer and Tassilo Hummel PARIS (Reuters) -France's Hermes will carry out price hikes in the United States to fully offset the costs from President Donald Trump's tariff policies, the company said, as it posted first-quarter sales below market expectations in a rare show of weakness. Banking on its pricing power, Hermes intends to add a premium to all of its products sold in the country from May, coming on top of regular price adjustments which were around 6-7% this year. "We are going to fully offset the impact of these new duties by increasing our selling prices in the United States from May 1, across all our business lines," said Finance Chief Eric du Halgouet, adding the company was still finalising the exact rates. The company known for its Kelly and Birkin handbags, which fetch upwards of $10,000, reported sales for the three months ending in March of 4.1 billion euros ($4.66 billion), a 7% rise on a constant currency basis. The performance fell below analyst expectations for 9.8% year-on-year growth, according to a VisibleAlpha consensus estimate cited by HSBC, slowing from an 18% surge in the previous quarter. Hermes's first-quarter sales miss was published days after sector bellwether LVMH reported disappointing figures, amid uncertainty in the global economy marked by trade tensions and recession fears. Speaking to journalists on a call, du Halgouet said that going into April, the company has not observed any significant change in shopper behaviour in the United States, where it still saw double-digit growth, partially limited by low inventories. "Of course, we are cautious about the United States given the discussions, the geopolitical uncertainty which, as you know, have caused a great deal of volatility on the financial markets," he said. The U.S. tariffs could include a 20% charge on European fashion and leather goods and 31% for Swiss-produced watches if fully applied. Last week, Trump paused most of his tariffs for 90 days, setting a general 10% duty rate instead. Commenting on China, another key market, which is weighed down by a real estate crisis weighing on the sector, du Halgouet said he has not seen any major signs of improvement, but added that recent government efforts to boost spending were a positive sign. ($1 = 0.8801 euros) Sign in to access your portfolio
