Trade wars hit the luxury industry: Chanel’s profits plummet by 30%
21 May 10:00
The French fashion house Chanel reported a significant drop in profits last year: operating income decreased by 30% to $4.48 billion. This happened amid a general downturn in the global luxury industry, which was exacerbated by economic instability and new trade duties initiated by the Donald Trump administration, "Komersant Ukrainian" reports citing Bloomberg.
China has reduced its appetite
The key market that let Chanel down was Asia – especially China, where sales were down 7.1%. Although the region brings the company about half of its total revenue, the growing caution of Chinese consumers in spending on premium brands has seriously affected financial results.
The sharp cooling of interest in luxury goods has become a global trend. Not only Chanel, but also other market giants, including LVMH and Hermès, have been hit, and they are also recording a decline in sales in the US. Analysts attribute this to the new 10 percent tariff imposed by Trump on imported goods from the EU. Another 20% duty may be introduced as early as July.
“In 2024, we were still experiencing the effects of unprecedented growth after the pandemic,”
– said Chanel CEO Lina Nair. But, according to her, the company is now forced to adapt to a new stage: controlling costs and revising the management structure.
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Chanel adapts to changes
Other factors of the decline include significant investments in expansion: last year, Chanel spent $1.8 billion on infrastructure development and real estate acquisition, including prestigious buildings in Paris and New York. Another $2.4 billion was spent on brand support.
Separately, Chanel is postponing the decision to raise prices in the US, pending a final decision on US duties. Unlike its competitors, who have already raised prices, Chanel considers it appropriate to wait.
Sales in the United States fell by 4.2%, while in Europe they grew by only a symbolic 0.6%. At the same time, the company does not plan any new layoffs: after 70 employees were laid off in the US in January, a stable level of employment is envisaged for 2025.
The changes have also affected the brand’s creative direction: after the resignation of chief designer Virginie Viard, she was replaced by Matthieu Blazy, and his first collection will be presented in Paris in the fall. This could also temporarily affect sales, as a new design vision takes time to take root in the market.
Chanel, which has long been considered one of the most resilient brands in luxury, is now demonstrating that even legends are not immune to the effects of global economic wars.
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