FOOTWEAR NEWS | HILARY GEORGE-PARKIN

On Monday, Chanel proved again that it is in a league of its own.

The luxury brand — one of the very few in the industry that remains privately owned — reported annual results for the second time in its 109-year history, posting sales in 2018 that surpassed $11 billion, up 10.5% year-over-year. CFO Philippe Blondiaux also reiterated the company’s denial that it may pursue a sale or IPO, telling WWD that he thinks “being private and independent is a core part of our model, and it’s a condition of our success.”

The rumors predate the Feb. 19 death of Karl Lagerfeld, Chanel’s creative director of 36 years, but executives have repeatedly dismissed them — and the company’s latest results bolster their claims that the current arrangement suits them perfectly well.

As for where to look for what’s behind the success? Asia-Pacific is a good place to start. The region saw nearly 20% year-over-year growth in 2018, reaching $4.7 billion in sales and surpassing the brand’s home continent for the first time. European sales were close to $4.3 billion, an increase of 7.8% over the previous year, while sales in the Americas were $2.1 billion, up 7.4% from 2017.

According to consulting firm Bain & Co., Chinese shoppers made 27% of their luxury purchases in China in 2018, up from 23% in 2015. That share is expected to rise to 50% by 2025. It’s an important demographic for any fashion house: Chinese consumers now account for a third of global luxury spending, according to Bain.

Chanel’s latest revenue figures put it in close competition with longtime sector leader Louis Vuitton. While parent company LVMH doesn’t break out sales for individual brands, Forbes estimates Vuitton has annual sales of $15.5 billion.

What sets Chanel apart from Vuitton and most of its rivals, though, is how diversified it is throughout a large range of categories, said Milton Pedraza, CEO of the Luxury Institute. Its beauty business — which is nearly a century old — accounts for about 30% of its sales and remains a popular entry point for younger or less affluent customers.

“People think of Chanel bags or Chanel suits, but the reality is that the company has been very strategically growing itself through beauty, through jewelry and watches in a way that has allowed them to grow profitably at double-digit rates,” he told FN, adding that ready-to-wear is a more significant part of Chanel’s business than it is for most luxury brands.

Footwear, too, is an important sales driver, he said. “The shoes are as coveted or nearly as coveted as the bags and have grown over the years,” he said, adding that footwear has generally been more resilient in the recession.

“I think Chanel has remained a very innovative example to brands when it comes to footwear,” added Robert Burke, chairman and CEO of Robert Burke Associates, a retail and fashion consulting firm.

Under Lagerfeld’s leadership, and with the help of house designer Laurence Dacade, Chanel embraced a wide range of trends and price points, from espadrilles to jelly shoes. “Things that people may not initially think of as pure luxury products, with Chanel’s twist on it and their strong branding, have been very successful with their footwear line.”

The company is a rare holdout on e-commerce for its ready-to-wear, leather goods and footwear. On its website, shoppers can buy makeup, fragrance and eyewear, but other categories are browse-only; to purchase, visitors are directed to call or visit a boutique. Chanel signed a partnership with the e-commerce platform Farfetch in February 2018, but the deal is aimed at enhancing the customer experience in stores through digital integrations rather than selling products online.

Monday’s sales report further demonstrates the scope of the brand’s investments in physical retail: It hired 3,000 new employees in 2018, the majority of whom are working in its store network. According to Burke, the company is also transitioning from commission-based pay to salaried pay for sales representatives, which tends to indicate a longer-term focus on customer service rather than straightforward sales. FN has reached out to Chanel for comment on the transition.

Doubling down on in-person retail is contrary to the direction many of its competitors are going. Online luxury shopping accounts for 10% of all luxury spending, according to Bain, and the share is expected to rise to 25% by 2025.

Burke said, “Chanel has always kind of followed their own beat.”

From the investments the company has made, it’s clear that it sees ample further growth potential in physical retail, even among younger shoppers.

And its stellar performance proves that consumers are still willing to spend in stores for the brand, no small feat.