Brunello Cucinelli on Pricing, Rebalancing, Fresh Product

MILAN — Brunello Cucinelli ’s outlook for the rest of the year is “very, very positive,” and he told analysts on Wednesday that he was aware he could sound “even too serene.” His only concern is to avoid at all costs delivering “a product that looks old.”

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Cucinell i had reason to sound upbeat, as he discussed the performance of his namesake company in the first half of the year, which showed growth in profits and revenues, boosted by all markets and all channels.

In the six months ended June 30, net profit climbed 31.1. percent to 66.1 million euros. This was achieved neutralizing the effects of the extraordinary capital gain relating to the sale of a minority stake in Lanificio Cariaggi to Chanel, which took place in May last year. Under the terms of that deal, the Cariaggi family retained control of the namesake company with 51 percent of the shares, while Brunello Cucinelli and Chanel each have a 24.5 percent stake. This was a new development in a deal that was signed in 2022 by Cariaggi and Cucinelli, the latter’s first such M&A. At that time, Cucinelli revealed he was buying a 43 percent stake in Cariaggi, his longtime cashmere supplier.

Confirming the preliminary figures released in July, Cucinelli revenues amounted to 620.7 million euros, up 14.1 percent compared with 544 million euros at the end of June 2023.

Operating profit rose 19.3 percent to 104.6 million euros.

Earnings before interest, taxes, depreciation and amortization rose 14.8 percent to 177.8 million euros, with a margin of 28.6 percent on sales.

The luxury industry’s high margins were the subject of some of Cucinelli’s remarks during the call, as he said these should be a consequence of the quality of a product. He lamented an increase in prices that he had recently witnessed, citing lodging and a wine list, which he believed “made no sense” and were offensive to customers, who don’t want to be left feeling duped.

Accordingly, “rebalancing” was a word he repeated throughout the call, as he cautioned against “three very important factors that should not be underestimated,” conveyed by multibrand retailers. “I hear they lament there are too many evergreen products lacking exclusivity and with exaggerated price tags.”

Speaking of his own company, Cucinelli, who holds the title of executive chairman and creative director, said sales in the first half were “excellent, profits were positive and balanced, the brand is fit and healthy, and the feedback on our product offering was highly favorable.”

All of that led him to confirm the expected 10 percent growth in sales in 2024 and in 2025, reiterating a forecast of doubling 2023 turnover by 2030.

Luca Lisandroni, who shares the chief executive officer title with Riccardo Stefanelli, said that all markets and channels grew in July and August as well, characterizing the two months as “excellent, showing a solid and consistent growth trend. The U.S. is in great health, domestic spending in mainland China is positive, Europe is solid, and Japan and Korea are very positive.”

In the first six months, revenues in the Americas climbed 19.4 percent to 225.6 million euros, accounting for 36.4 percent of the total.

In Europe, revenues totaled 153 million euros, up 7.8 percent on the first half of 2023 and representing 26.1 percent of the total, lifted by locals and American and Asian tourists. Separately, sales in Italy rose 11.8 percent to 68.1 million euros.

Sales in Asia rose 14.3 percent to 174 million euros, accounting for 28 percent of the total.

Global retail sales rose 14.7 percent to 395.2 million euros, accounting for 63.7 percent of the total. As of June 30, there were 126 stores. A new store in the Miami Design District opened in May.

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In the second half, a store will open in Toronto and one in Wuhan, China, and the company will expand its London boutique on Sloane Street by the end of the year.

In the first half, wholesale gained 13.1 percent to 225.5 million euros, representing 36.3 percent of the total.

As of June 30, investments amounted to 44.8 million euros, compared with 34.9 million euros at the end of June last year.

Commercial investments amounted to 20.1 million euros, dedicated to the company’s network of stores and showrooms.

Other investments, totaling 24.7 million euros, were mainly focused on the renewal of production plants and industrial projects.

The company is investing in doubling its manufacturing plant by restoring an existing industrial site in Solomeo, in a former industrial complex that has been completely reclaimed and redeveloped. The work is expected to be completed in October and guarantee production until 2035.

In the 2024-2025 period, the company also plans to open new manufacturing sites in Italy, in Penne and in Gubbio, supporting the plans to double turnover, as expected by 2030.

Investments in communication amounted to 44.6 million euros, compared to 36.3 million euros last year, an increase of 23.1 percent and an impact of 7.2 percent.

As of June 30, net debt stood at 68.7 million euros, compared with 38.6 million euros at the end of June last year, despite the major investment plan of 44.8 million euros in the first half 2024 and the payment of dividends totaling 66.1 million euros.

Cucinelli listed a series of events that will take place in the second half. These include the presentation of a second collection of fragrances on Sept. 12 and the “dinner of gratitude” at the Bourse in Milan on Sept. 30, celebrating 12 years since its IPO. He said the value of the company’s shares has risen 130 percent since then. After an event in Shanghai on Oct. 22 and 23, he proudly reiterated during the call that he will be bestowed the WWD John B. Fairchild Award on Oct. 29 in New York at the Apparel and Retail CEO Summit.

“I am deeply honored to receive such a prestigious award by WWD, dubbed the bible of fashion, which I consider a tribute to the dignity of the work, to my people, to their creative genius and their industrious effort, as well as to our Umbrian land and its spirituality,” said Cucinelli, citing previous recipients Maria Grazia Chiuri, Ralph Lauren, Karl Lagerfeld, Leonard Lauder, Giorgio Armani, Miuccia Prada and Tommy Hilfiger.

On Nov. 14 and 15, Cucinelli will hold an event on wine, inviting around 50 producers and wine collectors to Solomeo, and a dinner in L.A. with Silicon Valley tycoons is slated at the end of the year.

Cucinelli  spoke of his company’s new AI-based website unveiled in July, and said that it had garnered “great interest,” attracting “more interaction, more traffic, and longer visits, and is promising for its next phase of e-commerce.”

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