The French fashion label Chanel has said that the impact of the novel coronavirus pandemic will be felt by the international luxury industry for the next two years, and possibly even longer. The luxury retailer warned that the pandemic will severely hit the revenues and profits of the company for 2020, said its chief financial officer.
One of the biggest luxury brands in the world alongside LVMH’s Louis Vuitton, Chanel is known for its tweed suits, quilted handbags and No.5 perfume and is still privately owned.
The degree and the scale of the impact of the pandemic to its business so far this year was not provided by the company but the company’s finance chief Philippe Blondiaux told the media that the company predicts that the next 12 to 18 months would be particularly tough for it as well as for the entire luxury business industry. The business loss because closure of and reduced international travel would not be made up by strong performance and recovery in the countries where the group’s shops have reopened so far this year, Blondiaux said.
“We anticipate that the external environment will continue to impact the luxury sector negatively for at least the next 18 to 24 months,” he said in an interview to Reuters following the group reporting a 13 per cent growth in comparable sales for 2019.
The emergence of the novel coronavirus pandemic in luxury the sector’s key market of China and then spread to the rest of the world had for Chanel, just like its rivals, to close down stores all across the world and idle manufacturing units in response to the efforts of various governments to reduce the spread of the virus.
Currently, about 85 per cent of all stores of the company across the globe have managed to reopen. There had been, for example, a rebound by 100 per cent in sale in China in some weeks for the company, Blondiaux said.
“This very strong performance with the local clientele will be insufficient to compensate for the absence of international business, for the absence of international visitors and for the fact that our duty free business… is still to a very large extent closed,” he said.
There could be a drop in sale of as much as 35 per cent this year globally for the international luxury industry that is worth about $310 billion annually, predicted consultancy Bain.
While still expecting to churn out a profit for this year despite the grim outlook, Chanel has decided to reduce its spending on advertising and promotions by more than a quarter while also cutting down on production. The company has also cancelled or transformed some events such as fashion shows for this year and has instead decided to stream them online.
However, Chanel said that two catwalk shows scheduled for later this year may still go ahead physically.
The rise in costs of raw materials has also forced the company to increase prices on some products like handbags, Chanel said.
(Adapted from FirstPost.com)