MILAN — It’s not surprising for Brunello Cucinelli to quote Thomas More. On Thursday evening, commenting about his namesake company’s restart and first quarter sales, which were down 2.3 percent and dented by the coronavirus pandemic, the reference to the humanist and politician’s thoughts were even more fitting with the current situation as the entrepreneur voiced his desire to “have the strength to change things that can be changed and the patience to accept those that cannot be changed.”
In this vein, it was clear throughout the call with analysts that Cucinelli has indeed made a number of changes and decisions over the past few weeks that he is confident will help the company weather the storm. A tempest that reminded him of how his family of farmers was affected by a hailstorm that destroyed everything when he was 10. “The next day, a neighbor helped us by offering us 20 hay bales that we returned years later. And when we started sowing again, we did it with even more care. That was an economic crisis for us, this is a hailstorm for the entire humankind and of course it is also a health emergency,” he said.
To be proactive, Cucinelli has been holding monthly meetings with clients, analysts and suppliers, and in mid-April he held a virtual three-day road show. “We have been channeling 40 percent of our time to the management of 2020 to protect the brand, our creative minds and the organization, and the remaining 60 percent of time is dedicated to 2021 and 2022,” said Cucinelli, who remains positive about the future, believing the second half of the year will help balance the expected slowdown in the second quarter, and confident that a cure and a vaccine for the coronavirus will be found soon.
Cucinelli said he projects 5 percent growth in sales in 2021 compared with 2019 and earnings before interest, taxes, depreciation and amortization margin of 14 to 15 percent. Sales in 2022 are expected to be up 10 percent, with an EBITDA margin in line. “I continue to believe in the 2019-2028 plan,” he added.
This means doubling his company’s revenues in the next 10 years. Revealing that project last year, Cucinelli, who is chairman and chief executive officer, said he planned to take a step back in 2020 and become executive chairman and creative director. He would be flanked by two co-ceo’s: Riccardo Stefanelli, the husband of his eldest daughter Camilla, who has 14 years of experience within the company, and Luca Lisandroni, who joined four years ago from Luxottica. On Thursday, Cucinelli said this succession plan will be voted on by the board on May 21.
Speaking of the COVID-19 outbreak in Italy at the end of February, he said that, looking at China’s experience, he knew that in six to seven weeks the company would be back to work. He was touched by the reaction of his employees, who are willing to work until the end of August, taking one week off instead of two, and on Saturday mornings, in order to make up for lost time and be able to deliver the fall collections without delays.
The company resumed operations on April 16 with all the staff involved in the collections and prototypes, consisting of about 23 percent of employees. Since May 4, the entire company has been fully operational, as has the production operation, in compliance with health protocols for the protection of workers. As the result of an agreement between the company and the Department of Medicine of the University of Perugia, employees have the opportunity to undergo both a nasal swab test and serological sampling in order to see if they test positive for COVID-19. Cucinelli headquarters are in Solomeo, Umbria, which has been one of the least affected regions in the country and one of the first to recover. Seventy-five percent of Cucinelli’s production is in Umbria, the rest between Tuscany and the Marche, working with 364 companies with an average of 15 employees.
Cucinelli believes his collections will be physically in showrooms around the world by July and August. “It is fundamental to touch the product. We’ve been closed at home for two months looking at screens, we’ve seen and re-seen everything and there is a desire to go back into the stores,” he said.
While a firm supporter of e-commerce, which he said was up 50 percent, he noted: “Speaking for myself, after two months I can’t bear video calls anymore — not this one,” he said with a chuckle. “I want to go back to a store, I love a store. I mean to buy two tennis rackets and I want to go to a store and be advised by the salesperson,” he said, reiterating his belief in a balance between technology and humanism.
He cited Croatian economist Benedetto Cotrugli and his “The book of the art of trade” from 500 years ago, which Cucinelli said had been forgotten but is “very contemporary,” citing how it is important to make gains “with honor and justice,” respectful of the right price. The entrepreneur sees this as increasingly more relevant as a sustainable economy becomes more and more important. “I wanted to repeat what Jeff Bezos recently said because I found it interesting: We need humility, ability, ideas and money,” Cucinelli said, referencing the Amazon founder.
Confirming preliminary sales reported in April, in the three months ended March 31 sales were down 2.3 percent to 156.7 million euros compared with 160.4 million euros in the same period last year.
Revenues in Italy decreased 13.9 percent to 24.4 million euros, representing 15.6 percent of the total, dented by the closure of the stores in the second quarter of the year.
Sales in Europe were down 2.2 percent to 51 million euros, accounting for 32.5 percent of the total. The closure of the brand’s boutiques in Europe in the face of the health emergency took place in the last two weeks of March, with a marginal impact on the first quarter results.
Revenues in the North American market increased 9.5 percent to 50.8 million euros, representing 32.4 percent of the total. The trend featured a sharp improvement until the first third of March, when the monobrand and multibrand spaces closed. Touting the relationship with department stores in the U.S., responding to a question about Neiman Marcus, which had filed for Chapter 11 protection a few hours earlier, Cucinelli said, “It’s the most beautiful player in the world of luxury,” and praised Bergdorf Goodman and Mytheresa, too.
“If I lived in the U.S. and had enough money, I would buy [Neiman Marcus] immediately,” he said.
He was pleased it would be able to continue to operate under bankruptcy and said that he was not owed money from the store.
Sales in China decreased 27.2 percent to 11.2 million euros, accounting for 7.2 percent of the total, hurt by the coronavirus emergency. In particular, significant drops were reported since the last week of January and throughout the month of February, due to the regulations passed by the Chinese government to curb the expansion of the infection. In the first 10 days of March, following the gradual normalization of the health situation and the reopening of stores, there were the first signs of improvement, which were confirmed over the past few days.
In the Rest of the World area, sales amounted to 19.3 million euros, or 12.3 percent of the total, up 6.6 percent.
By distribution, the retail monobrand channel was down 7.4 percent to 65.9 million euros, accounting for 42.1 percent of the total. A first part of the quarter — until the end of February — was very positive, but was dented by the closure of a considerable number of boutiques in the second half of the quarter.
As of March 31, the store network amounted to 107 boutiques. The new New York boutique in the Meatpacking District was opened in the first quarter of the year. A new banner in London “is ready,” said Cucinelli, and a unit in Paris is expected to open in June. “These are all very important and for the second half we found an opportunity we had been waiting for for years, expanding in New York, relocating to Omotesando in Tokyo and in St. Petersburg,” he said. These will involve investments of 6 million to 8 million euros between October and December, taken from the 2021 budget.
The wholesale monobrand channel reported sales of 11.2 million euros, representing 7.1 percent of the total, inching up 0.5 percent. The network comprises 30 units.
The wholesale multibrand channel was up 2 percent to 79.7 million euros, accounting for 50.8 percent of the total. Cucinelli did not lament any cancellation of fall orders.