Chanel said revenues grew by double digits in the first six months of 2021, and its full-year operating profit margin is on track to return to 2019 levels.
The French luxury house reported on Tuesday that revenues totaled $10.1 billion in 2020, down 18 percent at comparable rates.
This was in line with the forecast by Bruno Pavlovsky, president of fashion and president of Chanel SAS, who said in June 2020 that the company was expecting a double-digit drop in sales for the full-year. Chanel underperformed competitors such as luxury conglomerate LVMH Moët Hennessy Louis Vuitton, which saw revenues decrease 16 percent at constant exchange rates in 2020; Kering, which reported a 16.4 drop in organic sales, and Hermès International, which recorded a 6 percent decline.
In terms of profitability, the group, which is privately owned and run by the Wertheimer family, fared even worse. It logged an operating profit of $2.05 billion, down 41.4 percent from the previous year, as it poured investments into its staff and infrastructure, even as sales faltered due to the coronavirus pandemic.
By comparison, operating profit was down 28 percent at LVMH, 34.4 percent at Kering and 15 percent at Hermès.
Philippe Blondiaux, CFO of Chanel, said the figures reflected the company’s commitment to protecting its staff, supply chain and business partners during a “delicate and painful” year. For instance, Chanel declined to take advantage of government schemes to furlough its staff, and acquired some of its financially struggling suppliers.
“We’ve done this while we knew very well from the start that this would have a negative temporary impact on our margins and cash flows,” Blondiaux said. “So we believe we’ve taken a different approach compared to many other companies. And if we look at where we are today, and the fact that we are bouncing back so quickly, that was probably the right thing to do, and how we behaved as a company during this crisis is what our employees, our customers, our partners will remember for the very, very long term and this will pay off.”
He added that Chanel’s portfolio of activities differs from that of most competitors.
“Our fragrance and beauty portfolio is much bigger proportionately than any of our peers and this business, for example, has suffered tremendously from the absence of duty-free business. So you know, we can compare, but I think it would be probably misleading to try to compare at consolidated top line level,” Blondiaux said.
He reported that momentum has been growing since last fall, and revenues at Chanel between January and June 2021 grew by double digits versus the same period in 2019, the year that is being used as a comparison base by most companies. He had initially predicted it would take up to two years to return to 2019 levels.
“I’m very happy to have been proven wrong on this forecast. And we are already not only back to 2019, but way ahead of our 2019 numbers, and it’s the same for our margin,” Blondiaux said.
If current trends are maintained, the operating profit margin for 2021 should bounce back to between 28 percent and 29 percent, after dropping to 20.3 percent in 2020, he added.
This story was reported by WWD and originally appeared on WWD.com.