Chanel has ruled out an initial public offering, insisting that it can hold on to its privately owned status and remain the world’s second-biggest luxury brand.
“We’re going to stay a private, independent company,” Leena Nair, the French company’s global chief executive, said. “Rumours always float around, but you can put those to rest.”
Wearing head-to-toe Chanel and speaking in her office overlooking New Bond Street in London where the company decided to move its headquarters in 2018, Nair told the Financial Times that she remained “cautiously optimistic” about the luxury goods market.
The sector has remained resilient despite the pandemic, the war in Ukraine and a surge in inflation that has squeezed consumer confidence. Chanel reported sales of $15.6bn in 2021, the latest annual results it has published, up 22.9 per cent from pre-pandemic levels and making it second only to Louis Vuitton among luxury brands by revenue.
“I see the return of China. I see the pent-up demand, the pursuit of self-indulgence,” she said in her first interview since joining the 113-year-old brand in January last year. Asia-Pacific, led by China, accounts for more than half of Chanel’s annual revenues.
But she warned that the US, where sales growth is plateauing for rival LVMH, “is going through this phase where nobody is really sure whether to be optimistic or pessimistic”. Chanel this week revealed that the president of its US business was departing after 16 years.
Chanel is owned by Alain and Gerard Wertheimer, whose grandfather Pierre Wertheimer was an early business partner of founder Coco Chanel. It began publishing annual results in 2018 to “provide the ammunition to remain who we are: private and independent”, chief financial officer Philippe Blondiaux told the FT at the time.
But the disclosures, which have consistently shown the company to be in rude financial health, have only served to stoke speculation that the Wertheimers may be laying the groundwork for a public listing.
Nair joined Chanel after three decades at Unilever, where she rose to become chief human resources officer. She is the first Indian national to lead a major luxury brand, as well as the first from an HR background.
She said that she had spent the first 16 months of her tenure on a listening tour, visiting 25 of Chanel’s offices and 40 of its manufacturing facilities as she develops her “100-year vision” for the company. She is also studying French.
“As global CEO, my goal is to ensure that our iconic house continues to be a beacon of inspiration for the next 100 years,” she said. “And that means constantly investing in disruptive capabilities.”
In the past five years Chanel has invested in 33 start-ups that could enhance the client experience or change ways of working, including augmented reality specialists that can help the company market to online consumers.
Nair said Chanel was “continuing to look at” opportunities to further consolidate its supply chain. The company acquired more than two dozen suppliers in 2021, part of a $1.1bn investment in technology, property and manufacturing. “We want to preserve craftsmanship. So we will continue to acquire métiers [and] workshops that make sense,” she said.
Nair sees sustainability as among the trends most likely to disrupt the sector. Chanel, which was later than many of its peers to make decarbonisation promises, has pledged to halve absolute carbon emissions from its own operations by 2030 and cut those in its supply chain, where the majority of its environmental footprint lies, by 10 per cent.
She said the company had to “encourage buying less but better quality” in order to “decouple” revenue growth from sales volumes, “and we have to invest in carbon capture technologies”.
The prices of core Chanel products have risen significantly since the start of the pandemic, with some handbags now selling for 74 per cent more than they did in 2019 in the UK, according to Jefferies analysts.
“Like everyone else, we respond to changes in raw material costs, changes in production costs and exchange rate fluctuations,” she said, adding that while “it’s always hard to say” whether prices would continue rising, “I see the inflation numbers across all markets and it’s going up. Materials and production costs are also not slowing.”
The company is also seeking to improve its offering to its most lucrative customers.
Top spenders — known in the industry as very important customers or VICs — are becoming ever more important to the sector, with the top 2 per cent of spenders now accounting for 40 per cent of luxury sales, up from 35 per cent in 2009, according to Bain.
To serve such customers better, Chanel has opened a number of “salons privés” within existing boutiques in Asia, Europe and the US.
“There is a focus on ultimate client experience in fashion,” Nair said. “More and more we have to segment different kinds of clients. We’ve got to think about who are the clients who really get the Chanel experience and are expecting something more refined, more sophisticated.”