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PARIS (Reuters) – Chanel sales in the United States, one of the luxury label’s top three markets, have slowed to a single-digit growth rate over the past six months, it said on Thursday, adding to evidence that the post-pandemic spending splurge in the country has tapered off.
“Clearly the trend has softened since November,” Chanel’s chief financial officer Philippe Blondiaux said of U.S. sales, adding that the U.S. market had enjoyed double-digit growth in 2022 but without providing a precise figure.
The increase of sales with Chinese shoppers, in mainland China and as they resume travelling, is “more than enough to compensate the temporary softness in the U.S.,” said Blondiaux.
Known for its tweed suits, quilted handbags and No.5 perfume, the privately held brand – the world’s second biggest beyond Louis Vuitton – makes 50% of its sales in Asia.
It did not break down the proportion of U.S. sales, which accounted for 27% of revenues last year at rival LVMH and Kering (EPA:PRTP), and 18% at Hermes.
Leading luxury stocks in Europe dropped to seven-week lows this week, a selloff prompted by concerns about the U.S. market, where younger and more aspirational shoppers are holding off on luxury purchases due to a rising cost of living and economic uncertainty.
“This Q2, ongoing sluggishness in the U.S. market is shaping up to be the key focus point,” analysts at HSBC said in a note on Thursday, after hosting a luxury conference with 21 companies in Paris.
Most of the companies said U.S. trends had not improved since the first quarter, while some signalled “somewhat of a deterioration,” the analysts said.
Blondiaux said Chanel was continuing to invest in the United States, where it recently opened a new store on Rodeo Drive in Los Angeles and sponsored the Karl Lagerfeld exhibit at the Metropolitan Museum in New York.
The company, which has over 32,000 employees, plans to accelerate hiring this year, growing headcount by around 16% after an increase of 12% in 2022, with the bulk of new positions in retail networks. Chanel is also expanding its global headquarters in London, where it moved from New York in 2018.
Many luxury brands are moving further upmarket and catering to their wealthiest clients who are more immune to economic turbulence. Chanel, which increased prices aggressively throughout the pandemic, said it is also focusing on younger consumers as it invests in stores and digital tools, including ones for trying on jewelry virtually.
“We are seeing younger consumers and we want to make sure we are supporting them in a way – when you see the reasons for why the young are buying, they buy less and buy better, they buy to invest,” said chief executive officer Leena Nair, a former Unilever (NYSE:UL) executive, who took the helm in January 2022.
The group, owned by French billionaire brothers Alain Wertheimer and Gerard Wertheimer, posted $17.2 billion in sales 2022, a 17% rise on a comparable basis, with double digit growth in all regions and all of its products, it said.
