Chanel’s 2020 Sales Tumble 18%

Chanel's sales fell 18% last year to $10.1 billion as the pandemic wreaked havoc with luxury goods makers. Operating profit fell more than 41% to $2.04 billion. In comparison, LVMH Moët Hennessy Louis Vuitton's sales fell 16% and Hermés International's sales dropped 6%.

Still, CFO Philippe Blondiaux noted that the strength of the Chanel brand was clearly demonstrated in 2020 as the business delivered a resilient financial performance during a very challenging period for employees, partners and for the business itself.

“Chanel’s focus on creativity and innovation, unique savoir-faire and the agility of our teams and our organization, helped to limit the impact of the crisis,” said Blondiaux. “At the same time, Chanel has continued to prioritize investment to support the long-term health of the brand, with record levels of capital expenditure through the year.”

According to Chanel, the final quarter of 2020 saw an improvement in sales trends, thanks to the creativity of the brand, and to the support of its strong local customer base. Fragrance & Beauty focused on providing a seamless experience for customers, with strong growth in online sales partially offsetting the impact from the decline of travel retail. Skin care had a notably strong performance within the beauty segment, supported by Le Lift and Sublimage. In fragrance, Coco Mademoiselle and Bleu had good years, while Chanel No5 prepared to celebrate its 100th anniversary in 2021, with Marion Cotillard as its new muse.

By region, sales in Europe fell 36.4% to $2.885 billion. Sales in Asia Pacific fell 3.1% to $5.257 billion and sales in the Americas fell 15.0% to $1.966 billion.

Fiscal 2021 is off to a good start. Chanel said revenue grew double-digits in the first half and full-year operating profit is expected to return to 2019 levels.

To stay relevant in its next century, Chanel invested more than $1.1 billion in capital expenditures in 2020, an all-time high. A portion of that investment included the acquisition of its London New Bond Street flagship in October 2020, the complete reconstruction of the fashion and watches and fine jewellery boutique in Beverly Hills (which will open in 2022) and the continuous expansion of its fragrance & beauty standalone boutiques network.

Also last year, the company completed construction of  the 19M in Paris – Aubervilliers, a five-story complex where 600 artisans will work together, to preserve, develop and give visibility to the savoir-faire of the Métiers d’Art.

Chanel said that all of these investments, regardless of their type (retail, offices, manufacturing and logistics, etc.), integrate the highest sustainable and green building standards, including systematic LEED certifications for the retail boutiques, strong environmental certifications for operational facilities, and extended the implementation of low energy consumption and renewable energy systems, such as through the use of solar panels. Technology-related investments also remained a key focus in 2020, including the strengthening of its infrastructure as well as the development of digital initiatives to support the client experience.

At the same time, Chanel’s commitment to sustainable business was reinforced in 2020 with the launch of its climate action plan, Chanel Mission 1.5°. The initiative will reduce its carbon emissions in its own operations (scope 1 and 2) by 50% by 2030 and in its supply chain (scope 3) by 40% per unit sold by 2030. Chanel’s targets are in line with the ambitions of the Paris Agreement and the company has also committed to shifting to 100% renewable electricity by 2025. Last year, Chanel showed it is on track to achieving its climate ambitions with a decrease in its total scope 1 and 2 emissions by 27.1% and scope 3 emissions by 24.9% compared to 2019, while renewable electricity usage is already at 70%.

Planning for the future includes leadership succession, too. Chairman Alain Wertheimer is 72 years-old, but Blondiaux said Wertheimer remains healthy and runs the business on a daily basis. As a result, succession planning is underway, but no announcement will be made in the near future.