It has been revealed that the global luxury goods giant Chanel experienced a sharp decline in performance last year. With consumption slowing in Asia and North America, and overall brand operating expenses surging, the company has entered a significant adjustment phase after years of growth.
According to Bloomberg on the 20th (local time), Chanel recorded an operating profit of $4.48 billion (approximately 6.21 trillion won) for last year, a 30% decrease compared to the previous year. Revenue during the same period fell to $17.85 billion (approximately 24.75 trillion won), which is also a drop of 4.3% from the previous year.
Regionally, the sluggishness of the Asian market stood out. Last year, Chanel’s revenue in the Asia region decreased by 7.1%, causing a significant impact on overall performance, while North American revenue also fell by 4.2%. Europe saw a slight increase of 0.6%.
Aggressive investment also impacted profitability. According to Bloomberg, Chanel increased its capital expenditure by 43% from the previous year to $1.8 billion, of which approximately $600 million was used for real estate acquisitions, including sites on Montaigne Avenue and Cambon Street in Paris, as well as the New York flagship store. In addition to this, Chanel spent $2.4 billion on marketing and brand promotion expenses.
There are analyses suggesting that changes in brand identity have also negatively affected sales. The resignation of chief designer Virginie Viard, who led collections for five years, in June has left Chanel in a leadership vacuum in design. Subsequently, the management has recruited Matthieu Blazy from the Kering Group's Bottega Veneta, and the first collection is set to be unveiled at the Paris Fashion Week in October, but there are expectations in the industry that consumer demand may temporarily slow during this period.
Amid this, uncertainty in tariff policies is raising interest in whether Chanel will implement price increases. U.S. President Donald Trump imposed a 10% tariff on European products in February, followed by a warning of an additional 20% tariff starting in July, prompting Chanel to temporarily suspend plans for price increases on its products in the U.S. Previously, competitors such as Louis Vuitton, Hermès, and Cartier, owned by the Richemont Group, have already raised their product prices.
Chanel is expected to tighten its belt during this turbulent period. Philip Blondon, Chanel's Chief Financial Officer (CFO), noted during a recent earnings announce that "we will reassess the entire expense structure for sustainable revenue" and emphasized that "monitoring for profit stability is necessary."
In fact, Chanel has reduced its workforce in the U.S. by about 70 this year and plans to freeze the workforce size across all its global offices. Lina Nair, Chanel's Chief Executive Officer (CEO), stated, "Now is the time to focus on reestablishing the brand’s long-term vision rather than short-term performance," and emphasized that "we are entering a transition period for sustainable value creation."