Chanel feeling the pinch as prices soar and its sales and profits in Australia head south
Well-heeled shoppers from Sydney to New York are baulking at Chanel's decision to lift the prices of luxury handbags almost 100 per cent, triggering a sharp decline in the designer brand's sales and profitability.
Well-heeled shoppers from New York to Sydney are reportedly baulking at the accelerated price hikes pushed through by French luxury fashion house Chanel, triggering a sales and earnings slide for the retailer in Australia.
A sharp retreat in sales and profit for Chanel’s Australian arm has revealed that even the world’s most affluent consumers are not immune to cost-of-living pressures or ‘sticker shock’ when they walk through the door, with Chanel struggling across the globe and particularly in the Asia Pacific region.
The latest accounts lodged with the corporate regulator show Chanel Australia posted sales of $499.65m for calendar 2024, down more than 16 per cent from 2023 when its sales were almost $600m.
Runaway price hikes
Profits in Australia for the French fashion house founded by designer and businesswoman Coco Chanel suffered even more, shrinking by almost 87 per cent to $6.69m and partly driven by, according to its ASIC accounts, a $10m jump in its employee costs.
The Australian performance reflects the tougher trading conditions experienced by Chanel globally, resulting in a 30 per cent slump in operating profit. Asia Pacific, its worst performing region, recorded a 9.3 per cent fall in sales.
Chanel’s poor performance in Australia also was a break from a recent growth spurt. The fashion and fragrance house famous for its Chanel No. 5 perfume posted sales growth of 4.8 per cent in 2023 and a 24 per cent increase in sales in 2022.
“Our 2024 performance followed a period of exponential growth for Chanel; our pace of growth in Australia since 2019 has seen us almost double as a business in terms of revenue and headcount,” a spokeswoman for Chanel told The Australian.
“We recognise that the luxury sector is experiencing fluctuations, and macroeconomic and geopolitical volatility is unquestionably challenging for business. As a 100-year brand, we expect ebbs and flows and will continue to navigate with our long-term strategy. At Chanel, our philosophy has always been to act and grow with a long-term view, and we will continue to invest significantly in the future.
“We will continue to invest in our distribution network, enhance the ultimate client experience, and advance our sustainability transformation.”
While other leading luxury fashion brands have maintained their strong growth trajectory – handbag and clutch rival Hermes witnessed a 21 per cent sales leap in Australia last year – Chanel has stumbled on the catwalk of late.
“We saw challenging macroeconomic conditions which had an impact on sales in some markets,” said Leena Nair, Chanel global chief executive, after the company reported a 4.3 per cent fall in global sales for 2024 to $US18.7bn ($28bn).
Classic flap problem
However, analysts have pointed to runaway price hikes at Chanel, and other luxury fashion brands, for the slowdown in spending with even the most loyal Chanel shoppers baulking at recent price rises.
One report recently highlighted that more than half of Chanel’s 16 per cent growth in sales for 2023 was driven by price rises, with some of its iconic products such as the Chanel classic flap bag witnessing a near-100 per cent price increase since 2019 to more than €10,000 ($18,000). This compared to a 50 per cent rise in the average price of luxury goods over the same period. The classic small handbag is currently listed on the Chanel Australia website as selling for $17,260.
Myer executive chair Olivia Wirth, whose department store sells a wide range of Chanel products, said consumers were struggling with price pressures.
“It’s pretty tough out there at the moment. There’s been a lot of discussion around the core indicators across the Australian economy improving. But from a consumer perspective it’s pretty tough, and it’s patchy, and we’ve seen that for some time,” she told the annual Australia’s Economic Outlook event presented by Sky News and The Australian.
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