Leaked report shows loss for Chanel International

Chanel International, the Dutch holding company that has the French luxury brand under its wing, had a 9 per cent year-on-year loss with turnover of US$5.67 billion last year, according to a leaked document.

Chanel International does not publicly disclose its earnings, but two publications have been able to access a confidential 91-page document audited by Deloitte and filed at the Amsterdam Chamber of Commerce.

This showed the company’s net income fell nearly 35 per cent from $1.34 billion to $874 million. The publications say its operating income slid 20 per cent to $1.28 billion, resulting in a 22.5 per cent decline in profitability – a slight improvement on its 25.7 per cent decline the previous year.

According to the document, Chanel International’s decline is partially explained by the sale of its subsidiary Chanel UK, which represents about 11 per cent of its sales, to another entity also under its control. “On an equivalent benchmark, at constant exchange rates, the results are stable.”

Terrorism impact

It also attributes the revenue drop to terrorist attacks in Europe hitting the flow of tourists. The impact of the company’s sale of the Bourjois beauty brand to Coty in April 2015 also impacted sales for the first quarter of last year. Chanel received 15.43 million Coty shares, equivalent to about $240 million at the time.

Figures in the leaked report probably also include Chanel’s fragrance and beauty sales, as well as earnings from other brands owned by the Wertheimer family, including swimwear brand Eres and British gunmaker Holland & Holland.

But while results dropped, dividends to Chanel International’s shareholders, Alain and Gérard Wertheimer, increased. Bilan says the brothers received $3.41 billion last year, more than double the $1.64 billion for the previous year. Alain has been global chief executive of Chanel since January last year, while Gérard oversees Chanel’s watch division. Their grandfather, Pierre Wertheimer, was the business partner of Chanel founder Gabrielle “Coco” Chanel.

Meanwhile, the luxury goods market is expected to return to growth this year, driven by domestic spending in China and tourism in Europe, according to a May study by US advisory firm Bain & Co.