LONDON, United Kingdom — Synonymous with French high fashion and blockbuster Parisian runway shows, Chanel is one of the biggest brands in the global luxury business. Its outrageous octogenarian creative director and the personal style of its chic female founder are the stuff of legend.
But how much the company makes from global sales of its No. 5 perfume, ready-to-wear collections and array of accessories has been a closely guarded secret, until now.
In a radical about-turn, Chanel — founded by Coco Chanel, an aspiring actress and seamstress, with the opening of a small millinery boutique in Paris in 1910 — released its annual results on Thursday for the first time in its 108-year history. It also announced a reorganisation that will bring all its various companies under one roof.
The numbers show that Chanel is among the largest luxury brands in the world by revenues, outpacing rivals like Gucci and neck and neck with Louis Vuitton. Sales growth is strong, and the company is ramping up investment.
The announcements are, however, more important for their symbolism. At a time of heightened competition in high-end retail and of persistent rumours that Chanel could be a takeover target, the storied French fashion house said it had opened up its books to show that it had the size, and the willingness, to fend off any approaches.
“We realised it was time to put the facts on the table as to exactly who we are: a $10 billion company with very strong financials, plus all the means and ammunition at our disposal to remain independent,” Philippe Blondiaux, Chanel’s chief financial officer, said in a telephone interview.
“We recognise that we are often a subject of much speculation and that people don’t have facts to hand, leading to the circulation of false or misleading information,” he added. “It was time to let the strength of our balance sheet speak for itself.”
The figures released on Thursday showed total sales for the 2017 calendar year were $9.62 billion, up 11 percent compared to the previous year on a constant-currency basis. That growth was primarily driven by sales in the Asia-Pacific region and in Europe, while operating profit came in at $2.69 billion. Net debt stood at $18 million, with free cash flow of $1.63 billion.
Investment in so-called “brand support activities” — such as marketing and advertising spend, fashion shows and international customer events — was $1.46 billion in 2017, the company said, a 15 percent annual increase which Mr Blondiaux said reflected the company’s confidence in upping the stakes when fuelling the growth of its luxury empire.
It also announced that it had established a new, London-headquartered holding company, Chanel Limited, as part of efforts to bring all its businesses and 20,000 employees under a single roof and to simplify a legal and organisational structure unchanged since the 1950s. Mr Blondiaux was named director for Britain this month.
Gucci announced this month that it had sales of 6.2 billion euros, or about $7.1 billion, in 2017, and said it had a long-term goal of reaching €10 billion in sales. Though LVMH does not break out sales by brand, analysts estimate that Louis Vuitton has about €8 billion to €10 billion in annual sales.
The figures underscore Chanel’s leading position in the increasingly competitive global luxury market. Appetite for the company’s product — labelled with its trademarked “double C” logo — among both new and longtime customers remains enviable.
“We are very proud of who we are at Chanel and how much we have achieved while always retaining a core vision and creative heritage,” Mr Blondiaux said. “This will remain the same in 10 years, 50 years — centuries — to come. This is what we want to communicate.”
Still, the inaugural publication of an annual report also comes at a time of flux for the French luxury juggernaut.
Chanel’s chairman, Alain Wertheimer, and his brother Gérard each own half of Chanel and have $14.1 billion fortunes, according to the Bloomberg Billionaires Index. But one is 69 years old and the other 68, and it is unclear who will succeed them.
In 2016, the former chief executive officer Maureen Chiquet was fired because of differences of opinion over the strategic direction of Chanel with the Wertheimer family. Amid speculation about receding profits and dipping sales, her role was assumed by the chairman, whose grandfather Pierre Wertheimer (and his brother Paul) co-founded the Société des Parfums Chanel to produce and market Chanel fragrances and beauty products in 1924.
Originally credited 35 years ago with resurrecting the once-stagnating label by hiring Karl Lagerfeld as designer, and creating a luxury powerhouse led by sales of perfumes and cosmetics, Mr Wertheimer has taken on more responsibility to “ensure continuity” in the wake of Ms. Chiquet’s departure. He is working closely with other members of the leadership team to devise a plan to secure the fashion house’s long-term future. But details were not forthcoming.
“Our [chief executive] is in great shape and seems to come up with an idea every five minutes. Who might come next is not on the agenda,” Mr Blondiaux said, while noting that there were members of the Wertheimer family employed at Chanel “gaining extensive business experience.”
Similar questions around who might replace Mr Lagerfeld at the creative helm were also rebuffed. The flamboyant German designer — given to controversial statements such as attacking Angela Merkel and her immigration policy — refuses to divulge his age, but is now in his mid-80s.
The industry has obsessed over possible new ownership, as well.
Rumours have circulated with increasing intensity in recent months that, as one of the last privately owned brands in the business, Chanel was a likely target for a takeover approach.
Bernard Arnault, the billionaire who controls LVMH and who launched a protracted and ultimately unsuccessful bid for control of Hermès, has long been thought to covet Chanel, and to be keen to add it to his portfolio of brands that includes Louis Vuitton, Christian Dior and Fendi (where Mr. Lagerfeld is also creative director).
Mr. Blondiaux denied that a brewing takeover attempt had triggered the changes in corporate strategy, insisting, “We are not for sale, and absolutely nothing will change that.”
The intention of the annual report, he said, was to ensure that industry observers and customers alike had a better understanding of Chanel as a company, and of the brightest spots in its performance and portfolio.
Gabrielle, a new fragrance launched last year, drove growth in fragrances, for example, while 2017 was a record year for sales of high-end jewellry. Although the company did not break down revenues between sectors and product lines, its ready-to-wear and leather collections were the largest areas of fashion sales.
“We could not be happier with where we are as a business,” Mr Blondiaux declared, “and have a clear vision of where we will go next.”
Territory has been staked. A flag planted where all can see. The luxury wars continue.
By Elizabeth Paton. This article originally appeared in The New York Times and was legally licensed through the NewsCred publisher network.