Chanel announced on Tuesday that it intends to invest in expanding its store network in mainland China, even though consumer spending is shifting.

Leena Nair, the CEO of the famous company known for tweed suits, quilted purses, and No. 5 perfume, said that scaling up is really important. She said she saw young people in China becoming interested in luxury items as long-term financial investments.

Luxury companies' sales in mainland China for the first quarter showed disappointing figures, indicating that the demand for expensive clothing in the country is not bouncing back quickly. This has made it difficult to predict the industry's future, as there were high hopes that the main market would drive growth once the post-pandemic spending in the US and Europe slowed down. Chanel's CFO, Philippe Blondiaux, said the company has fewer stores in China compared to its competitors. While Chanel has 18 boutiques, its rivals have 40-50.

Chanel plans to open a private salon and repair facility in Shanghai soon. Blondiaux said that even though the climate has become more challenging after experiencing three years of great growth, the plans are included in an overall increase in capital spending this year to $1.8 billion from $1.2 billion in 2023. The executives said that Chanel will spend more on marketing and advertising compared to the previous year, but it will be a smaller percentage of sales.

Younger consumers are spending less on luxury fashion because their living expenses are increasing. As a result, the luxury market is adjusting to this decline in demand. Chanel's revenue grew by 16% in 2023 to $19.7 billion, despite a slowdown in the US. They saw double-digit percentage growth in Asia and Europe to compensate for it. The corporation hired almost 36,500 new employees, a 14% increase in employment.