Channel says US growth has slowed over the past six months

Iconic luxury house Chanel’s growth has slowed in the US over the past six months, pointing to a slowdown in luxury’s biggest market after years of boom.

The world’s second largest privately held luxury company is currently growing “in the single digits” in the US, chief financial officer Philippe Blondiax told the Financial Times, following nearly 10 per cent growth in the US. — where the US accounts for the majority of sales — last year.

“There was a slowdown in the US, so not that different from some of our competitors through November of 2022, and that continued through the first few months of 2023,” Blondiax said.

The channel projects record revenue of $17.2bn in 2022, up 17 per cent year-on-year.

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 initial public offering, saying the company will remain privately owned.

Concerns about the outlook for the luxury sector after several years of unprecedented growth hit listed shares this week, with a combination of profit-taking and concerns about the outlook for the US draining $ from the sector in the space of two days. Wiped out worth over 60bn.

Global leader LVMH’s stock is down 6.8 percent this week, as is Gucci-owner Kering, while Hermès fell 4.3 percent.

“We maintain a really strong outlook for 2023, perhaps a more positive outlook than what has been reflected (during the selloff) over the past few days,” Blondiax said. “It was the analysts’ belief and how they see the industry developing in 2023, but as far as we are concerned, we are confident in the outlook for the year.”

He added that he did not expect a change in the growth trend of the luxury industry in 2024 and 2025. “We remain positive for the industry, but I would say even more so for the channel.”

Luxury sector conferences organized by Morgan Stanley and HSBC this week brought a more sober look to the industry’s outlook, however, after several years of rapid growth and record revenue the mood changed.

“U.S. demand for luxury remains weak, particularly with the young (and) aspirational consumer,” HSBC analysts wrote Thursday, noting that “outside the U.S., there appears to be no cause for concern.” And the recent selloff was “likely uncorrelated with fundamentals”.

The weakness among such aspirational buyers is likely to have less impact on top-end brands such as Chanel, which cater to mid-market luxury consumers.

The company said half of House’s revenue growth last year was due to price increases.

According to Jefferies, Chanel has significantly increased prices for its core products since the start of the pandemic, mirroring trends across the industry, with some handbags now selling 74 percent more in the UK.

“The reality is that we are one of the most exclusive or most exclusive brands (and) we intend to maintain this position. But going forward, the evolution of our prices will depend on two factors: inflation and currency effects,” Blondiax said.

In China, luxury’s biggest growth market, Chanel said it is bouncing back with double-digit growth in the mainland after a zero-Covid lockdown late last year brought most industry in the country to a near standstill .

The channel said Chinese tourism, a key driver of luxury sales, is also on the rise again. Sales to Chinese buyers in France were down 90 percent last year compared to 2019, but by this April were back only 14 percent below pre-pandemic levels in value terms – though traffic was still about half that.

“The most affluent part of Chinese customers are those who are currently traveling,” Blondiax said. “Today, the most limiting factor preventing the full return of Chinese consumers to Europe is flight capacity,” he said.