French luxury group Chanel began a far-reaching restructuring last year as its profit rose despite nearly flat sales and as it took on debt to build a new headquarters, according to its accounts.
The figures shed some rare light on the activities of the privately held company, world famous for its Chanel No.5 fragrance and whose public face for more than two decades has been artistic director Karl Lagerfeld.
The accounts show that the competitor to groups like Dior and Gucci is in the midst of a big restructuring project and is taking on more debt.
Sales rose 0.9 per cent to 928.7 million euros (£636 million), of which 671.9 million euros (£460.2 million) were made outside France, according to copies of annual accounts filed at the commercial court of Nanterre.
Current operating profit rose to 111.4 million euros (£76.3 million), or 12 per cent of sales, from 103.7 million euros (£71 million) in 2004.
Net profit rose to 65.3 million euros (£74.5 million) from 53.6 million euros (£36.7 million) in 2005. A 43 per cent rise in its tax bill to 36.5 million euros (£25 million) was more than offset by a decline in exceptional charges to 5.5 million euros (£3.76 million) from 21.6 million euros (£14.7 million) a year earlier.
In a report, management painted a mixed picture of 2005 with problems on the French perfume market offset by growth elsewhere, particularly Russia, and a decline in turnover in leather goods balanced by strong sales of jewellery and watches.
It also predicted a brighter 2006. For perfume and beauty products, management wrote: "The current dynamism of markets, associated with a marketing plan rich in new products make us very optimistic for 2006."
The report predicted "significant growth" for its fashion and leather goods business - helped by renovated stores in Paris - and strong year for jewellery and watches.
Company officials declined to discuss the accounts or developments in its business.
The accounts say that in February 2005 Chanel acquired all of the shares in its perfume and beauty products unit Chanel Parfums Beaute previously held by its Bourjois cosmetics subsidiary for a total o f 227.8 million euros (£156 million).
But debt also increased to 315.9 million euros (£216.3 million) from 245.9 million euros (£168.4 million). The new HQ is still in the pipeline.