MILAN — Brunello Cucinelli felt the pain of the pandemic and the consequences of the lockdown, which impacted sales and profits of his namesake company in the half, but on Thursday he wrote off 2020 as a year of “transition between a past time and a new time,” choosing to look at his firm “with a fresh new eye,” emphasizing a trend inversion from July 1.
“Today, we can say that we have steered the company into ‘safer waters’ and given our esteemed employees physical security in what they do as well as the security of being employed,” said Cucinelli, executive chairman and creative director of the brand, during a conference call with analysts.
“The entire company has acquired an even stronger awareness about the fact that they need to be fast, flexible, concrete and brave as they have realized that we have to coexist with this virus which can still evolve every day,” he added, noting that he had just taken his third COVID-19 test since April. “There is a desire to return to normality and to support our own territories. As one philosopher said, ‘dry leaves fall near the trunk of the tree.’”
He proudly said that the company is fully operating with its 2,024 employees as it was in February before the coronavirus pandemic, with tests being performed and offered every 15 days. “This project will end when the pandemic is over,” said Cucinelli.
While confident in his company’s growth in the third and fourth quarters, and forecasting a 10 percent decrease in sales for the full year, Brunello Cucinelli SpA in the first six months ended June 30 posted a normalized net loss of 25.8 million euros, neutralizing the accounting effects of the extraordinary provision relating to inventories and the accounting effects relating to the application of IFRS 16. This compares with a profit of 22.8 million euros at the end of June last year.
In the period, sales were down 29.6 percent to 205.1 million euros compared with 291.4 million euros in the first half last year.
Enthusing about the reaction to the spring/summer 2021 collections, Cucinelli said he expected a 15 percent growth in revenues in 2021, and margins of around 13 to 14 percent, characterizing it as the “year of rebalancing.”
After successfully delivering its fall merchandise in July and August, and physically presenting its spring collections in its Shanghai, New York, London, Munich, Milan and Solomeo showrooms last month, Cucinelli said the company “may have created the most beautiful collections of our entire history — at least that is what our multibrand customers and managers of our stores have declared. This is an outstanding result, spurred on by the new trends, which have moved in the direction of our taste. The order collection of about 60 percent is very, very significant. We would dare say thrilling.”
Cucinelli touted the company’s solidity, as it provides timely deliveries and it allows clients to touch the garments, all added assets at the moment, he noted.
In the first half, all the company’s markets were affected by the pandemic.
Sales in Italy were down 34.7 percent to 28.9 million euros, representing 14.1 percent of the total, but showing “interesting signs of recovery” as the stores gradually re-opened.
In Europe, revenues decreased 24.1 percent to 70.1 million euros, accounting for 34.2 percent of the total.
Sales in North America fell 38.9 percent to 57.5 million euros, accounting for 28 percent of the total.
Revenues in China dropped 20.6 percent to 22.9 million euros, accounting for 11.1 percent of the total. The company reported a progressive and solid increase in its retail channel.
“Business in Russia and China has picked up very well, and the Northern European countries are returning to normality,” said Cucinelli. “We see concrete signs of a restart in the U.S.”
In the Rest of the World area, sales were down 19.1 percent to 25.8 million euros, accounting for 12.6 percent of the total.
Normalized losses before interest, taxes, depreciation and amortization amounted to 14.1 million euros, compared to earnings before interest, taxes, depreciation and amortization of 49.9 million euros in the same period last year, neutralizing the accounting effects of the application of IFRS 16 and the extraordinary provision amounting to 30 million euros related to the new “Brunello Cucinelli for Humanity” project, which, as reported, gifts excess and unsold clothing generated by the pandemic, rather than marking it down or shipping it off to a discounter.
“We have been contacted by so many people around the world who are concerned about supporting and improving humanity,” said Cucinelli, citing in particular Sharon Stone.
In the first half, the normalized operating loss amounted to 29.8 million euros compared to an operating profit of 35.9 million euros last year.
The monobrand retail channel posted revenues of 102.5 million euros, half of the total, down 31.6 percent.
At the end of June, the company had 107 boutiques, one more than the end of December, due to the opening at the beginning of the year of the new banner in New York, in the Meatpacking District.
Revenues at the monobrand wholesale channel amounted to 13.6 million euros, down 25.3 percent and accounting for 6.6 percent of the total. As of the end of June, the company had 30 boutiques, unchanged compared to the end of December.
Sales at the multibrand wholesale channel declined 27.8 percent to 89 million euros, representing 43.4 percent of the total, impacted by the suspension from the second half of March of all corporate operations related to production, including deliveries to both multibrand and monobrand wholesale channels.
Personnel costs amounted to 57.5 million euros, compared to 53.8 million euros, as a result of the decision to maintain and guarantee the employment and salary levels of all employees.
Investments in communication, personalized customer relations and online development amounted to 13.3 million euros, compared with 16.2 million euros, with an increase in digital communication. Cucinelli said he believed that the general success of the online business seen this year “will not happen again as people need to return to the physical” experiences. To wit, he said that he will add a selection of 60 to 70 books in his stores, creating small libraries for the pleasure of customers.
The cost of rents, relating to contracts with variable consideration, is equal to 4.7 million euros, compared to 10.3 million euros — a reduction that is related to the trend in turnover in the first half of 2020.
Inventories amounted to 218.1 million euros compared to 179.8 million euros, impacted by the effects of the lockdown.
Cucinelli said it was a priority to maintain the strategic investment plan to support the brand. In the first half, investments amounted to 22.4 million euros compared with 18.8 million euros invested in the same period last year.
In particular, commercial investments in its network of stores and showrooms amounted to 16 million euros, and other investments include those related to production, logistics and IT and digital services. A new store will open in Paris on Sept. 12, and the company is doubling its banners in Madison Avenue in New York, in St. Petersburg, in Tokyo and in Las Vegas, said Cucinelli.
As of June 30, net financial debt amounted to 136.5 million euros compared to 46.6 million euros at the end of June last year.