The pandemic has spared no one, in fashion and luxury. Not even Chanel , which has just published the data for 2020, gave some advances on those of the first half and made forecasts for the whole of 2021. Basically: last year the revenues of the French luxury house fell by 18%, but for the current year a 35% increase is expected, which will bring the data back to pre-pandemic levels.
Each has made its own story
Looking at the more general picture, the drops in turnover in fashion and luxury have been between 10 and 50% and in some cases even greater, with more than proportional losses in profitability. But the medium or “forks” tell only a (small) part of the story. Each segment has made its own history and the same goes for companies within the same segment. For various reasons: the first is the geographical diversification (those who were very present in Asia hooked the recovery first, already starting from the second half of 2020). Then there is digitization: not only for the B2B (e-commerce) part, but also for the B2C one and in general for the use of technology in business processes. A third factor is the internal structure: governance, ability to react, cultural flexibility and, last but not least, the degree of inclusiveness and the presence of young managers.
Loading…
Resilience factors
Most of all, however, the solidity of the brand and its positioning counted: the brands with the highest positioning and the most solid heritage recovered more quickly (and showed the much praised resilience). First, because – it is a sad reality of the pandemic – the most affluent sections of the population all over the world suffered less. Second, because the blanket of insecurity and fear in which the pandemic has enveloped us has led to make reassuring choices, even in the most discretionary consumer goods, such as luxury.
Chanel 2020 data
It is only since 2018 that Chanel (in the photo, the cruise 2021-2022 collection), a still private company, founded in 1910 by Gabrielle Chanel and which employs approx 27 thousand people in the world, publishes the details of the income statement (on the other hand, very little is known about the balance sheet, precisely because of its legal nature). Those of 2020 photograph a difficult year: the figures have been disclosed in dollars, perhaps because in this way the turnover is higher than what is obviously considered a psychological threshold, the 10 billion. In US currency, the exact figure is 10.1 billion (8.34 billion euros), down 18% compared to 2019 on a “comparable basis and at constant exchange rates”, the official statement reads. Operating profit was $ 2.049 million, down 41.4% from 2019. The cash balance remains positive, despite investments of € 1.36 billion in brand support activities. Capex (capital expenditure) reached record levels, reaching 1.12 billion dollars, equal to 11.1% of turnover, “Demonstrating Chanel’s commitment to long-term value creation and confidence in the company’s financial strength.” Cash flow, on the other hand, was down sharply: 679 million dollars (-70% compared to 2019).
The long-term vision and commitment to sustainability
Philippe Blondiaux, global chief financial officer (CFO) of Chanel, also recalled and commented on the initiatives taken despite the pandemic on the sustainability front: in March 2020 Chanel presented the plan Mission 1.5 °, in line with the objectives of the 2015 Paris global climate agreement (the one that was also signed by Barack Obama and from which Donald Trump had withdrawn, but in which the United States has now returned thanks to Joe Biden). Chanel’s progress towards its science goals since 2019 has been:
– A 27.1% decrease in total greenhouse gas emissions of the “scope 1” and “scope 2” levels
– A decrease in greenhouse gas emissions of the “scope 3” level of 24.9%
– 70% of electricity from renewable sources (compared to 50% in 2019)
In September 2020 Chanel also collected 600 million euros through the issue of Sustainability Linked Bonds (obligations linked to the achievement of sustainability objectives) «diversifying its sources of financing and at the same time underlining its commitment to sustainability at the heart of its corporate strategy». The offer of the bonds on the Luxembourg Stock Exchange was significantly lower than the demand and Chanel was the first issuer without a rating and the first in the luxury sector to place public bonds linked to the achievement of its sustainability objectives.