Brunello Cucinelli Sees Recovery in Q3, Stands by 10-Year Plan
MILAN — “We are almost at the end of the marathon, the mood has changed — it’s been tough for the body and for the spirit, but if we continue to be careful, it’s almost over.”
News of the effectiveness of a vaccine for the COVID-19 pandemic lifted Brunello Cucinelli’s mood and the tone of the conference call with analysts on Thursday evening, as the executive chairman and creative director of his namesake company spoke about the performance in the first nine months of the year.
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As many of the brand’s competitors, the Italian luxury company registered a recovery in the third quarter, although the period was weighed down by a tough second quarter affected by store closures during lockdowns.
In the first nine months ended Sept. 30, sales at Brunello Cucinelli amounted to 378.7 million euros ($449.4 million), down 17.5 percent compared to 459.2 million euros ($544.9 million) in the same period last year.
Revenues in the third quarter totaled 173.5 million euros ($205.9 million), up 3.4 percent compared to 167.8 million euros ($199.1 million) in the prior-year period.
The performance in the third quarter led Cucinelli to be upbeat about the fourth quarter, though he expects a 10 percent decrease in revenues for 2020.
In light of the strong orders for the spring 2021 collection, Cucinelli said he sees 15 percent growth in 2021, which he called “the year of rebalancing.” He also stood by the company’s plan to double sales in the 2019-28 period.
In the first nine months of 2020, sales at Brunello Cucinelli in North America fell 21.4 percent to 116.5 million euros ($138.3 million), representing 30.7 percent of the total and compared with 148.2 million euros ($175.9 million) in the same period last year. In the third quarter, revenues rose 9.2 percent, lifted by local demand.
Revenues in Europe decreased 13.4 percent to 120.9 million euros ($143.5 million), accounting for 31.9 percent of the total, and compared with 139.5 million euros ($165.5 million) last year. In the third quarter, sales rose 7.7 percent.
The company reported significant increases throughout Central and Northern Europe, boosted by local customers. On the other hand, the performance of Mediterranean Europe is still lagging behind, owed in part to the lack of tourists and, in some areas, by the persistence of fears related to the coronavirus.
Sales in Italy fell 23.1 percent to 58.5 million euros ($69.4 million) in the first nine months, representing 15.5 percent of the total, and compared with 76.1 million euros ($90.3 million). In the third quarter, revenues decreased 6.9 percent as local spending only partially compensated for the significant decline in international tourism.
In China sales fell 12.6 percent to 38.1 million euros ($45.2 million), accounting for 10.1 percent of the total, and compared to 43.5 million euros ($51.6 million). In the third quarter, revenues in the area rose 3.2 percent.
“China has the potential to represent 20 or 22 percent of sales in three to five years,” Cucinelli said, while underscoring his efforts to maintain an exclusive positioning of the brand in the region.
The company reported solid positive growth in mainland China and Taiwan, which in the quarter fully compensated for the significant drop in traffic in Hong Kong and Macau.
Sales in the rest of the world dropped 13.9 percent to 44.7 million euros ($53 million), accounting for 11.8 percent of the total, and compared with 51.9 million euros ($61.6 million) last year. In the quarter, revenues fell 5.7 percent.
South Korea, which is an entirely wholesale market, showed gains but could not offset the reduction in turnover in Japan, which in the third quarter of 2019 performed very well before the increase in value added tax.
Cucinelli said China, Russia, the U.S. and Japan performed better than expected.
Retail sales fell 26.1 percent to 169.3 million euros ($200.9 million) in the period, representing 44.7 percent of the total, and compared with 229.2 million euros ($272 million) last year. In the third quarter they dropped 15.7 percent.
As of Sept. 30, the network comprised 107 boutiques. Cucinelli said there are no changes in the investments planned, which are expected to represent 7 percent of total sales next year, and will also be channeled into expansion projects. For one, the company will open a new boutique in St. Petersburg and Omotesando in Tokyo, and double the flagship footage on Madison Avenue in New York and the Crystals boutique in Las Vegas.
While Cucinelli’s direct online store doubled revenues to represent 5 percent of total sales, the entrepreneur underscored the ongoing importance of brick-and-mortar stores and personal service to customers.
The wholesale channel was up 20.5 percent in the third quarter, but in the nine months sales fell 9 percent to 209.4 million euros ($248.5 million), accounting for 55.3 percent of the total and compared with 230 million euros ($272.9 million) last year.
Cucinelli reiterated his belief in the importance of working with multibrands, even more so now that local spending has become so significant.
“Multibrand retailers know their customers, they can help us with sizes, weights of fabrics and trends. A customer in Athens is different from one in Hamburg,” Cucinelli said. “And I really believe that if you don’t sell it’s because the product is not contemporary and not interesting,” he continued, praising buyers for being “independent judges of designs.”
To that, he added, “At the beginning of the pandemic we made three big decisions: not to fire anyone and to guarantee a salary to all our employees, not to ask for discounts consistent with our company culture, and with the ‘Brunello Cucinelli for Humanity’ project to gift surplus merchandise from our boutiques after months of lockdown, trying in some way to improve living conditions of those in need.”
Asked about the company’s net financial position, Cucinelli said it stood at about 125 million euros ($148.3 million).
