Chanel's profits fell for the first time in five years

The deluge that is hitting luxury sales has reached even the mountain peaks: Chanel, one of the most powerful names in the global luxury industry, has reported its first annual revenue decline since the pandemic, signaling an increasingly evident cooling in the high fashion and beauty markets. For fiscal year 2024, the French maison recorded revenues of $18.7 billion, with a 4.3% drop at constant exchange rates. The contraction marks a sharp reversal after three consecutive years of almost unprecedented expansion, during which the brand nearly doubled its revenue performance. The setback was even more marked on the profitability front. Operating profit fell from $6.4 billion to $4.5 billion, representing a steep 30% decline, due to weakening demand, particularly in Mainland China, and Chanel's aggressive investment strategy, which the brand has maintained despite growing macroeconomic uncertainty and geopolitical tensions. Global CEO Leena Nair and CFO Philippe Blondiaux remained resolute in the face of this decline, citing long-term brand health and foundational investments as priorities for brand growth. “We’re a 100-year-old brand,” said Nair, “and we expect highs and lows. We’re not chasing short-term numbers — we’re investing in long-term strength.” In 2024 alone, Chanel invested a record $1.8 billion in capital expenditures, up 43% from the previous year. This included $600 million dedicated to strengthening its manufacturing capabilities, particularly through a minority acquisition in Mantero, an Italian silk specialist.

At the same time, spending on brand-support activities such as marketing and campaigns remained essentially flat year-over-year at $2.45 billion, a negligible decline from $2.46 billion in 2023. Major campaigns included the launch of the first campaign for the N°5 fragrance with actress Margot Robbie and a renewed marketing push for the Chance line, including the release of Chance Eau Splendide, Chanel’s first new fragrance in eight years. The maison opened 48 new stores during the year, expanding its global retail network from 612 to 644 boutiques. This included key additions in the United States and China (22 new boutiques in those two markets) and first-time ventures into emerging territories such as India and Canada. Notable openings included a dedicated high-end jewelry and watch store on Manhattan’s Fifth Avenue and the debut of the House of Beauty in Paris. Additionally, the brand announced a hiring freeze for 2025, planning to keep its workforce stable at 38,400 employees. This follows the hiring of 1,900 new employees in 2024, part of the 10,000 hires made in the past three years. In the United States, Chanel cut 70 jobs, equivalent to about 2.5% of its American workforce. While rumors circulated about a potential 20% workforce reduction in China, Blondiaux clarified that adjustments there would be “relatively minor” and largely achieved through normal staff turnover.

But pressure is mounting in Chanel’s core category, leather goods, historically its most profitable sector. Several years of price increases, which pushed the price of the iconic Medium Classic Flap bag beyond $10,000, have sparked some criticism. In 2024, Chanel moderated its pricing approach, raising prices by an average of 3% across fashion categories, aligning more closely with global inflation levels. The same pricing strategy is expected for 2025. Blondiaux emphasized that, in any case, other divisions recorded solid performances. Ready-to-wear sales, for example, grew by 23% in 2023 and remained positive in 2024 to date — all despite the absence of a creative director for part of the year. Jewelry and beauty also registered strong momentum. The Coco Crush fine jewelry collection, as well as makeup and skincare, led category growth. Much confidence was also placed in the launch of the new Chanel 25 handbag, described by Nair as “a huge success.” Among upcoming projects, there will also be a focus on India, which Nair described as “one of the world’s most vibrant economies.” The brand recently launched its first beauty store in Mumbai and signed a distribution deal with Nykaa, India’s leading beauty platform. CFO Blondiaux expressed strong confidence: “The way we navigate this cycle is different: we double down on investments and consolidate our strengths instead of retreating.”