February 19, 2019 / 5:19 PM / 7 months ago

Breakingviews - If Chanel were a normal company, it’d be in play

German designer Karl Lagerfeld appears on the catwalk after his Autumn/Winter 2004/2005 high fashion collection for the Chanel fashion house in Paris, July 7, 2004.

PARIS (Reuters Breakingviews) - Coco Chanel once remarked that “fashion passes, style remains”. The French billionaire brothers who own Chanel will undoubtedly replay those words in their heads as the fashion industry mourns Karl Lagerfeld’s passing. The iconic German designer, who for 36 years led the catwalk for the Parisian fashion house, was 85. A normal company might use the occasion to sell the business while it’s still enviously coveted. But a deal looks a long way off.

Chanel, founded in 1910, is the last single belle of the global fashion ball. It sells nearly $10 billion of perfume, clothing and make-up annually, growing at a 10 percent clip, according to a rare glimpse into its finances provided by a corporate restructuring last year. Around the multiple of sales that rival LVMH fetches, a purchase of Chanel would cost upwards of $40 billion. LVMH boss Bernard Arnault, whose firm has about enough firepower to finance such a deal, was notably quick with his public condolences for Lagerfeld today. 

Though the possibility of a Chanel trade has enchanted a generation of Parisian investment bankers, the music emanating from the atelier is unequivocal. “We are amazingly solid financially and we can keep our status as a private, independent company for the next few centuries,” Chanel’s CFO told Reuters last June. Of course, the passing of Lagerfeld is a moment for reflection. But history helps when interpreting Chanel.

It’s the oft-quoted founder whom customers think of when dousing their necklines with Chanel No. 5. But without the Wertheimer family, Chanel might just be another forgotten dressmaker. In 1924, Chanel contracted with Pierre Wertheimer, the grandfather of current owners, Alain and Gérard, to create a firm he controlled, to make and sell Chanel perfume.

It was a smashing success. So much so that Chanel tried to take the business back in 1941, using her Aryan status to petition for confiscation under the Third Reich. The Jewish Wertheimer, anticipating such a possibility, had already transferred control to a Christian Frenchman who collaborated and sold arms to the Nazis. After the war, he returned Chanel to Wertheimer, whom Coco called “the bandit who screwed me”.

The Wertheimer brothers are both around 70, but have time – and the genealogical fortitude - to let Virginie Viard pick up Lagerfeld’s scissors and prove that style does indeed endure despite the passing of fashion.


Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

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