The maison reportedly “borrows from US private-placement market” to the tune of €700 million. Does the company need the dough?

Chanel duplex store in Hong Kong International Airport

Chanel, without an artistic director, appears to be lacking something else too. According to Bloomberg recently, the 114-year-old brand has “raised over €700 million (about S$1.13 billion) from a privately-placed bond sale”. Apparently “people with knowledge of the matter” shared the news. But little is revealed about the need for such a financial arrangement. Chanel has yet to publicly responded to the reveal. The bonds, as per Bloomberg, would be managed by Société Générale and Goldman Sachs. Both banks have not commented on the report. Investopedia defines private placements as “the sale of company shares to a number of pre-selected investors.” This private arrangement is advantaged by not requiring the company “to go through the regulatory hurdles of an IPO… but still (en)able (it) to raise external funds to expand the business.”

Last May, Chanel’s CEO Leena Nair and chief financial officer Philippe Blondiaux granted WWD an interview with the announcement that “revenues totaled US$19.7 billion last year, up 16 percent at comparable rates, with double-digit growth across all categories”. According to Ms Nair, the company has, in the last decade, “more than doubled” its revenues and headcount, and, in the last half, also “more than doubled” the size of its distribution channels. There was effusive praise when it came to Virginie Viard. Ms Nair asserted that “Virginie is an inspiring woman, very successfully creating for women everywhere, and the feedback of clients—the comfort, the silhouette, the fit—it’s really positive, it’s landing really well.” But less than a month later, Ms Viard left the job she was successful at and held, admirably, for 30 years. Up till now, she gave no reason for her sudden departure.

There was effusive praise when it came to Virginie Viard. But less than a month later, Ms Viard left the job she was successful at and held, admirably, for 30 years

Although the maison appeared to be doing well, Chanel’s president of fashion Bruno Pavlovsky did not paint a rosy picture for 2024. At the brand’s Métiers d’Art show in Manchester last December, he told the media: “I don’t have a crystal ball, but the situation will be tougher than what we saw in 2023.” The remark then was seen as consistent a prediction with other top luxury brands. (Burberry—although not in the same league as Chanel— concurrently reported a worrisome 34 percent decline in annual profits for Q4.) Still, Ms Nair told Bloomberg TV last April that “the sector is doing well” and “internally it’s been a phase of rapid growth”. How attractively well Chanel had fared does not quite explain why the brand now needs to raise money through the sale of bonds.

Is it possible that they are worried that they wouldn’t be making as much as they had desired? Some observers found it curious that Chanel, despite the impressive profits and wealthy owners (the Wertheimer family), is not able to weather any storm that may come their way. Positive speculation suggests that Chanel is merely anticipating the worse that could emerge from a now-difficult luxury market. Conjectural talk shall prevail for as long as Chanel remains a largely secretive company. Ms Nair, a former human resource specialist at Uniliver, said to Bloomberg: “I want to lead Chanel into the future along with my team… by protecting what’s core to us, by protecting our differentiation, by protecting what’s unique about us, and by evolving as a scaled, iconic business and brand.” All that, it can be assumed, demand considerable expense. But even with the bonds issuance, there is no guarantee that prices at Chanel would not rise soon, and again.

File photo: Perrier Cheng for SOTD