Chanel Rejects Rumors of Possible Sale or IPO, Posts Revenues Surpassing $11 Billion

Chanel posted solid growth in revenues and profitability in 2018 and more than doubled its investments, signaling its commitment to a long-term strategy that excludes any possibility of a sale or initial public offering, the company said on Monday.

The maker of quilted handbags and No. 5 perfume reported revenues that totaled $11.12 billion last year, up 10.5% at comparable rates, driven by strong double-digit growth in the Asia-Pacific region. The uptick again places Chanel neck-and-neck with Louis Vuitton as the world’s biggest luxury brand.

Rumors that Chanel may be considering a sale or initial public offering have gained credence since the death in February of its long-time creative director, Karl Lagerfeld, who will be remembered in a memorial ceremony in Paris this week.

The company has repeatedly denied such speculation, and CFO Philippe Blondiaux again ruled out the prospect, saying the luxury house has solid management in place to remain independent.

“I think it will never happen. That’s the best I can say, whether it’s a sale or an IPO. I think being private and independent is a core part of our model, and it’s a condition of our success,” he told WWD after Chanel published its annual results for only the second time in its history.

Chanel increased its capital expenditures to more than $1 billion last year, equivalent to 9.1% of sales, investing in everything from IT and stores to its supply chain and staff. This compared with $439 million the previous year, and the firm expects a sustained pace of investments in 2019 and 2020.

Blondiaux said the level of investment was 50% higher than any of its direct competitors. Chanel employed 25,295 people at the end of 2018, up 13.5% from the previous year. A majority of new hires are in its store network, as it opens or renovates on average 30 boutiques per year.

“I don’t know any company preparing for a sale or an IPO which would invest so much for the long term, a company preparing for a sale or an IPO which would hire 3,000 people ahead of the curve to elevate the client experience. So I guess as a CFO, that’s the best denial I can offer, which are numbers,” said Blondiaux.

“These numbers, the investments we made in the business, is a sign of confidence in our leadership as it is a sign of confidence in our creators and in our brand,” he added, noting the strong track record of Alain Wertheimer, Chanel’s 70-year-old CEO.

On top of its capital expenditures, Chanel spent $234 million on acquisitions, including $90 million on Spanish leather tannery Colomer Leather Group, $44.1 million on British swimwear brand Orlebar Brown, an undisclosed amount on a minority stake in Farfetch, and a host of smaller acquisitions, some with a sustainability bent.

In addition, Chanel invested $1.65 billion in brand support activities, up from $1.51 billion the previous year. “We’ve always invested at a very sustained pace in advertising and promotions,” said Blondiaux, noting the increase was roughly in line with the progression of sales.

Going forward, the company plans to continue investing in its supply chain as it seeks to find eco-friendly alternatives to materials like leather, having banned the use of exotic skins in 2018. Chanel has pledged to use only renewable energy within its direct operations by 2030.

“We are really trying to put corporate social responsibility at the center of everything we do in terms of strategy, in terms of eco-conception of all our products. That’s pushing us to find new materials and even think long-term about alternatives to some of the materials we are currently using,” said Blondiaux.

“Our investments in CSR are growing beyond the transformation of our supply chain,” he added. “We’re going to provide a more comprehensive set of commitments in the coming months.”

This story was reported by WWD and originally appeared on WWD.com.

See the highlights at the 2018 FNAAs.

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