Chanel braves post-Lagerfeld era
Struck by the death of Karl Lagerfeld, the man who helmed Chanel’s image and design for 35 years, the Parisian luxury label made sure there was no time for doubt or rumour to set in. Chanel indeed broadcast as clear a message to the world as possible, by immediately putting Virginie Viard at the head of its collections’ design. Viard is in charge of the Parisian luxury label's fashion design studio and was Lagerfeld’s right-hand woman. Continuity is therefore assured, establishing an immediate connection with the legacy of Gabrielle Chanel and Karl Lagerfeld.
It is clear that Chanel, now one of the luxury market's most powerful fashion houses, arranged the succession in agreement with Lagerfeld himself. A handover that was plain for all to see when, last September, the German designer faced the public one last time, greeting the audience at the end of the show for the Spring/Summer 2019 collection, accompanied by Viard. And it was Viard herself, though this time alone, who stepped on the stage on January 22, at the end of Chanel’s haute couture show, when Lagerfeld had already been hospitalised.
On that occasion, the label took pains to emphasise in a press release the strength and solidity of the team working alongside its creative director: “Virginie Viard, as director of the design studio, and Eric Pfrunder, as director of Chanel's brand image, continue to support [Lagerfeld] and to supervise the label’s collections and advertising campaigns.”
The new woman in charge of Chanel's collections has lived until now in Lagerfeld's shadow, working symbiotically with the man known as King Karl, breathing life into his creations and coordinating Chanel’s creative teams as a virtuoso conductor. Viard admired Lagerfeld greatly, and became his closest collaborator, working with him for three decades. She first met Lagerfeld in 1987, when she joined Chanel as an embroidery intern in the haute couture team. A few years later, the German designer took Viard with him to Chloé, where he was creative director from 1966, before bringing her back to Chanel as the design studio’s director in 1997.
With Viard in charge of collections, Chanel will not risk a scenario like the one experienced at Gucci, whose aesthetic changed radically after Alessandro Michele, at the time the right-hand man of creative director Frida Giannini, took on the mantle as Gucci’s new demiurge. Like Michele at Gucci, Chanel’s new leading woman knows the luxury label inside out, including how its production organisation and its entire creative process work. But, unlike Gucci in 2015, Chanel is enjoying splendid health, and has absolutely no need for electroshock therapy right now.
Chanel has become so powerful in the last decade, that last year, for the first time, it allowed itself the luxury of disclosing its financial performance, whose indicators were never published before. For 2017, Chanel reported a revenue of €8.3 billion, battling it out with fashion’s other greats, from Gucci, whose 2018 revenue reached €8.28 billion, to Louis Vuitton, whose sales are estimated in excess of €10 billion, not to mention Hermès, with a revenue just shy of €6 billion.
In terms of profitability, Chanel’s operating income grew 22.5% in 2017 to $2.69 billion, with a 28% operating margin, while net income was $1.79 billion (€1.54 billion), up 18.5% over the previous year. The group’s free cash flow was $1.63 billion (+5.7%), while net financial indebtedness was $18 million at the end of 2017.
In 2017, Chanel also rationalised and streamlined its organisation, transferring the majority of the group's global corporate functions from New York to London. It then created the Chanel Limited holding company, which now heads most of Chanel's operational divisions. The brothers Alain and Gérard Wertheimer, who own a 100% stake in the company, stepped down from the executive board last year, though Alain remains as general manager, while Bruno Pavlovsky heads the fashion business.
Called on by the Wertheimer brothers to wake up their sleeping beauty, Lagerfeld accomplished the mission beyond the rosiest expectations, transforming the label founded by Coco Chanel in 1910 in one of the most profitable on the market, and making it one of the most influential French brands, with over 32 million Instagram followers. The Kaiser skilfully rejuvenated and modernised Chanel’s style, playing with and sometimes upending its design codes, eventually embodying its original spirit to the full.
“It will clearly be very hard to continue the legacy left by Karl Lagerfeld, so significant has his imprint been on Chanel," said Emanuela Prandelli, in charge of the LVMH Associate Professorship programme of fashion and luxury management studies at Milan’s Bocconi University.
"Over all these years, he managed to ensure Chanel remained impeccably consistent, while modernising it. Even if the group’s business is extremely diversified, notably in cosmetics and fragrances, the brand is renowned and identifiable worldwide especially through some of its iconic products, like the quilted handbags, which are closely linked to the designer’s aesthetic.
“The choice of Virginie Viard as [Lagerfeld’s] successor will enable the label’s identity to be preserved, though Chanel is faced with a huge challenge, that of finding a way of writing a new chapter in its history within a context of constant innovation. In a world as transgressive as that of fashion, Chanel has until now remained consistent. But we shall have to see what response it will now offer to a perpetually shifting, innovation-hungry market,” added Prandelli.
It is a delicate turning point for Chanel, one that could either usher in a new expansion boom or, on the contrary, herald a phase of instability. It is within this context that Viard’s promotion must be interpreted. According to several observers, her appointment may be temporary. Tasked with the mission of managing the necessary transition period after the death of Chanel’s star designer, Viard could eventually step down in favour of an external creative director charged with breathing new design energy into Chanel. Phoebe Philo, Céline’s former creative director, was one among the names that have been circulating lately. Something to keep an eye on.
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