THE ECONOMIST: Chanel’s creative revival is paying off

Few figures have been as influential in shaping modern haute couture as Karl Lagerfeld, creative director of Chanel from 1983 until his death in 2019.

His 36-year stint at the maison not only brought fresh designs after years of creative stagnation, but also extravagant — and occasionally bizarre — fashion shows that wowed magazine editors and wealthy shoppers alike.

His successor, Virginie Viard, proved an uninspired choice. Although sales rose by half during her five-year tenure, that growth came largely through price hikes during the post-pandemic luxury boom.

Fashion critics soured on the brand. Amid a wider downturn in the luxury market, sales at the world’s second-biggest luxury label fell by 4 per cent in 2024, with operating profit down by 30 per cent.

Lately, however, Chanel has been regaining its shine. On May 19 the private company, which is owned by brothers Alain and Gérard Wertheimer, reported that its sales and operating profit were up by 2 per cent and 5 per cent, respectively, last year.

In the first quarter of this year Chanel topped a ranking of the hottest labels in fashion maintained by Lyst, an e-commerce site, for the first time.

Two of its wares, a pair of square-toe pumps and a chunky handbag, numbered among the ten most desirable products as measured by social-media chatter.

During the most recent Lunar New Year holiday in China, analysts at Bernstein, a broker, counted a 130 per cent increase in foot traffic at Chanel’s stores in luxury malls. Its shops in New York and London have experienced similar crowds.

For the change in Chanel’s fortunes, the Wertheimer brothers can thank Matthieu Blazy, who took over as the label’s creative director in April last year. His success has served as a reminder that, in the world of high-end fashion, creativity and clever marketing are as vital as ever.

On April 28 Mr Blazy held his latest fashion show at the French seaside town of Biarritz, where he took house signatures such as tweed and lightened them up, sending semi-transparent suits and fringed skirts down the runway. Before the event, the company held lavish preview events for its “Very Important Clients”, the high-rollers who account for an outsize share of total sales.

It also made sure that its products, including some less expensive items, would enter stores quickly to make the most of the online buzz.

Meanwhile, many of Chanel’s competitors continue to struggle. Many hoped that 2026 would be the year in which spending on luxury items returned to growth. But the war with Iran has dampened consumer sentiment, not least among big-spending shoppers in the Gulf. Sales in the fashion division of LVMH, the colossus that counts Louis Vuitton, the world’s biggest luxury label, among its maisons, were down by 2 per cent year on year in the first quarter.

For Kering, which owns Gucci, they fell by 3 per cent. The buzz around Mr Blazy’s new designs hasn’t helped rivals. “Chanel is vacuuming most of the consumer attention”, says Luca Solca of Bernstein, a broker.

Even Hermès, which had seemed immune to the luxury downturn, now looks to be under pressure. Its sales in the first quarter were up by 6 per cent year on year, far slower than they had been growing.

The brand has cultivated an air of exclusivity by limiting production of its coveted Birkin and Kelly bags, forcing shoppers to join lengthy waiting lists. But beyond the release of new colours each year, Hermès has not refreshed its core product range in decades. Now there are signs that demand may be waning. The resale price of Birkin and Kelly bags has been dropping, according to Bernstein.

By contrast, demand for Chanel’s bags has been booming on secondhand markets. In the week after Mr Blazy’s first show for the brand, searches on Vestiaire Collective, a resale platform, for its signature flap bag increased by 132 per cent. Might Chanel have found its new Lagerfeld at last?