Chanel is more than doubling its London headquarters, boosting a shaky UK economy and signaling confidence in the luxury industry’s prospects as rivals’ shares have wobbled.
(Bloomberg) — Chanel is more than doubling its London headquarters, boosting a shaky UK economy and signaling confidence in the luxury industry’s prospects as rivals’ shares have wobbled.
The fashion company plans to expand its office space at a new property in the British capital’s exclusive Berkeley Square in Mayfair. The move by a brand historically associated with France comes amid growing concern about the UK’s loss of competitiveness post-Brexit, with several companies moving stock listings to the US or shifting manufacturing elsewhere.
The closely held fashion house reported a comparable sales increase of 17% for 2022, led by Europe. That was in line with Louis Vuitton owner LVMH but trailed the performance of Hermes International. Chanel’s profit growth lagged behind both competitors.
“We’ve maintained a really good momentum in 2023, more or less at a similar level” as last year, Chief Financial Officer Philippe Blondiaux said in an interview Thursday.
China’s reopening has boosted travel, giving Chanel a “lot of confidence” for this year, he said. Chanel is seeing double-digit revenue growth in the country, and sales generated from Chinese shoppers in France are starting to recover. Although demand in the US has softened since November, sales there are still growing by a single-digit percentage, Blondiaux said.
Investors have dumped shares in some of Chanel’s publicly traded rivals over recent days on concerns about a possible slowdown for the red-hot industry.
The brand behind Chanel No. 5 perfume plans to move its teams to the new London building, designed by Piercy & Co., by the end of 2025. Earlier this week, Chanel signed a tenancy agreement for the new building for the next 20 years with a possibility to extend it by another decade.
Chanel moved its global headquarters from New York to London in 2018. The new lease covers 86,000 square feet (8,000 square meters) across 11 floors. Chanel’s headcount grew 12% last year to 32,000 employees, with plans to increase by another 16% this year.
Although incorporated in the UK, Chanel has ties to Paris that date to its beginnings in the early 20th century, when Gabrielle “Coco” Chanel opened a boutique selling hats.
Chanel’s expansion in the UK comes at a difficult time for luxury brands there after the government decided to scrap VAT-free shopping for tourists, a measure that’s hurting business by giving international travelers less incentive to come to London.
Burberry Group Plc Chief Executive Officer Jonathan Akeroyd last week reiterated his disappointment at the change because it puts the UK at a “competitive disadvantage” relative to continental Europe.
The billionaire Wertheimer brothers — Alain, 74, and Gerard, 71 — who own Chanel have so far pocketed a much smaller windfall for 2022 than the total for the previous year. The latest report shows an interim dividend of $1.68 billion. That compares with $5 billion in payouts for all of 2021.
The siblings’ net worth was nearly $92 billion before the latest results, according to the Bloomberg Billionaires Index.
CEO Leena Nair said Chanel has no plans to list on the stock market. “We’re a private, independent company and plan to stay so,” she said Thursday in an interview.
(Updates with other luxury companies’ shares in sixth paragraph. An earlier version corrected a quotation on the dividend.)
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