Chanel’s Bold Move: Profit Plummets, But the Fashion House Goes All-In on the Future

Image SourceL: The Business Of Fashion

French fashion giant Chanel reported a steep 28% fall in full-year net profit in 2024, which highlights the increasing pressures confronting the world luxury industry as economic winds and evolving consumer trend whittle away at its fortunes. Even in the face of adversity, Chanel is doubling down on investments for the long term, indicating faith in the timeless attraction of its brand.

Key Highlights
Profit Decline:
Chanel's net profit declined 28.2% to $3.4 billion in 2024, while operating profit reduced almost 30% to $4.48 billion. Worldwide revenue dipped 5.3% to $18.7 billion.

Regional Performance:

Asia-Pacific sales decreased 7.1% to $9.2 billion, which is an indicator of a luxury slowdown in China.

Americas sales declined by 4.2%.

Europe defied the trend as the sales inched up 0.6%.

Divisional Trends:

The Fragrance & Beauty division recorded strong growth, particularly in travel retail.

Fashion struggled in Mainland China but delivered well in Japan and Europe.

Watches and Fine Jewellery recorded "dynamic growth."

Record Investments:
Capital spending was raised 43% to a record $1.76 billion by Chanel, with an emphasis on expanding boutiques, customer experience, and creative projects. Key property buys in Paris and New York and fresh stores in China, Japan, and the US indicate continued global expansion.

Strategic Outlook:
CEO Leena Nair stressed a long-term focus, referencing continued investments in boutiques, individuals, and brand support. CFO Philippe Blondiaux explained that high levels of investment and consistent brand activity affected short-term profitability but are the foundation for Chanel's future resilience.

Future Plans:
Chanel has additional expansion in strategic markets planned, including new boutiques in India, Mexico, and more locations in China, Japan, and Canada.

Price Strategy Uncertain:
In the midst of risky US tariffs and increasing expenses, Chanel is considering future price hikes, emulating similar action by competitors.

Chanel's performance reflects both the pitfalls and strength of leading luxury brands, as the business maintains its heavy investment in international coverage and brand value amid a choppy market.

Source: Financial Times, The Moodie Davitt Report, KNDU