French Couture House Sees Significant Growth, Net Income Increases To $6.4 Billion. CEO & CFO Defend Online Critiques of Virginie Viard Design Direction
Chanel reported a 16 percent increase in revenues for 2023, reaching $19.7 billion, driven by price increases and greater sales volumes. The French luxury house, impacted positively despite broader market slowdowns, saw net income rise to $6.4 billion.
Chief Financial Officer Philippe Blondiaux noted that price increases contributed to a 9 percent rise in sales, with continued strong demand for Chanel’s quilted leather handbags, Swiss-made watches, and Bleu de Chanel fragrances. “Double digit growth across all categories continued into the final quarter of 2023, where we delivered a top line growth of 14 percent,” Blondiaux said.
Chanel, the second-biggest luxury brand by revenue, has been increasing capital investments to strengthen its market position. In 2023, the company invested $1.2 billion in expanding and upgrading stores, internalizing supply chains, and converting more of its beauty business to retail. This included opening 47 new stores, 31 of which were dedicated beauty and fragrance boutiques.
“In the last decade, we have more than doubled our revenue; we have more than doubled our headcount. And in the last five years, we’ve doubled the size of our distribution network,” said Chanel CEO Leena Nair.
Marketing investments rose 20 percent to $2.5 billion, supporting new campaigns such as the “Bleu de Chanel” ads with Timothée Chalamet and a handbag campaign starring Brad Pitt and Penelope Cruz.
Despite these successes, Chanel has faced criticism in 2024 over significant price hikes and quality issues. In March, prices for Chanel’s medium flap handbags exceeded €10,000, surpassing many Hermès styles. Complaints of crooked stitches and loose hardware have circulated on social media platforms like TikTok.
“The numbers for 2023 confirm that our consumers totally endorse the level of quality,” Blondiaux stated, emphasizing continued investment in manufacturing quality. He also defended the creative direction of Virginie Viard, who succeeded Karl Lagerfeld, noting, “Since Virginie took over…the Chanel fashion business has been multiplied by 2.2. The Chanel ready-to-wear business has been multiplied by 2.5, and the ready-to-wear business last year of Chanel grew by 23%.”
As luxury demand cools, with LVMH and Richemont reporting slight sales declines in early 2024, Chanel plans to increase capital expenditures by up to 50 percent. “This period of slowdown…will offer opportunities, whether it’s in terms of real estate, boutiques, vertical integration of our supply chain, people,” Blondiaux said.
Mainland China remains a key area for growth, with Blondiaux highlighting that Chanel currently has 18 fashion boutiques in China, compared to over 45 or 50 by competitors. “China is still a place where we can continue to invest, which is what we’re going to continue to do,” Blondiaux said.
Despite the departure of several high-ranking executives last year, Chanel reported strong employee satisfaction rates. This included the exit of John Galantic, who had been with Chanel Inc. as the President and Chief Operating Officer since 2006, and leaders for Japan, Asia-Pacific, the U.K., Canada, and Latin America.
“Leadership changes and retirements are a part of the natural cycle of business. At Chanel, we are very privileged and lucky to have accomplished leaders who forged long careers,” said Nair, rejecting the notion of a mass exodus.
Operating profit for Chanel was up 10.9 percent to $6.4 billion last year and the brand plans to increase capital expenditure by 50 percent in 2024 following last year’s record investment of $1.23 billion to acquire prime store locations and invest in craftsmanship.
Chanel has boosted its presence by increasing its network to 612 boutiques. These include major locations such as Milan’s Via Montenapoleone and the re-opened flagship in Beverly Hills. Investments in “brand-support activities” surged 20 percent last year to $2.46 billion.
Chanel revealed its cruise 2024 collection in Los Angeles last year and replicated the event later in the year in Shenzhen, China’s tech capital. A part of its altered outlook was to seek out a new demographic of luxury clients by unveiling its Métiers d’Art collection in Manchester, England.
The company hired 4,500 people primarily in the digital and retail sectors last year, taking its total headcount to 36,500.