MILAN — The tide is turning at the Brunello Cucinelli company.
A positive third quarter prompted the namesake founder and executive chairman of the group to release an update on the performance of the brand and preliminary nine-month results on Thursday at the end of trading in Milan, where the company is publicly listed.
In the quarter, sales increased 3.6 percent to 173.8 million euros, compared with 167.8 million euros last year. Sales in the first nine months of 2020 amounted to 379 million euros, down 17.5 percent compared with 459.2 million euros in the same period last year, hurt by the strong impact of the pandemic in the first part of 2020.
There was no conference call with analysts, but Cucinelli is never reticent and added plenty of color to the results statement, including paragraphs referring to “a fresh, positive perspective” beginning July 1, “without worrying about the results of the first half, aware that we are living in a year of ‘transition’ and that we have entered a kind of New Time that requires humility, courage, creativity and speed of execution.”
Referring to the pandemic, although Cucinelli himself is not quoted, he is clearly behind the following: “Creation has asked us for help, in the form of a dispute between biology and Earth. The great ideals will return to the forefront: good policy, good family, spirituality and art. We will go back to using what the earth offers us instead of just consuming it, paying close attention to every detail: where it was produced, how it was produced, and that its production did not harm creation. We believe that we will return to harmonizing one of the great themes of life: the relationship between profit and giving. Perhaps we will not turn our backs on poverty, and we will consider any surplus as a kind of loving resource for the part of humanity that is in need. The great feelings of humans are always the same. We will work with the same dedication, but remembering that when humans are frightened, grieved, they are prone to kindness and not arrogance. People will be more aware of their purchases and will therefore be even more special.”
But Cucinelli is also a hands-on businessman, and he addressed the growth of the company in the third quarter, expecting that the favorable trend will continue until the end of the year, with an increase in sales compared to the same period in 2019. Cucinelli emphasized that the company did not receive any order cancellations for the fall 2020 collection and actually had “a large number” of new orders for spring 2021 from all markets, both for the women’s and men’s collections.
He believes the company will close 2020 with a “slight” drop in revenues of around 10 percent and a growth in revenues of around 15 percent in 2021, called a “year of rebalancing,” followed by 10 percent growth in 2022.
Sales in the North American market grew 9.1 percent in the third quarter. In the first nine months, sales amounted to 116.5 million euros, representing 30.7 percent of the total, down 21.4 percent. Cucinelli touted the resilience of “domestic” demand and stated that, despite the length of the acute phase of the pandemic in the area, “demand from the American market has never fallen, changing form, channel and geographical area while remaining very resilient overall.”
He singled out America as a focus, with China, saying that American customers were “probably the most active on the digital channel,” and that specialty stores in the region responded to the demand of local customers. “In parallel, we have started to see significant traffic in direct stores in resort locations, and since schools have reopened the sales in large cities are gradually improving. As China did in the second quarter, America has confirmed two very important impressions for the forecasts of the coming months. First of all, we believe that luxury customers have maintained the same desire, propensity to buy and possibility as shown over the last few years, and we also sense a growing desire to ‘experience’ physical stores again and to engage personally with local salespeople.”
In the third quarter, sales in Europe rose 7.5 percent. Revenues in the first nine months fell 13.4 percent to 120.8 million euros, representing 31.9 percent of the total. The performance was patchy, with “significant increases” throughout Central and Northern Europe, supported by local shopping, while Mediterranean Europe is still being impacted by the pandemic.
Sales in Italy were down 5.5 percent in the third quarter. Revenues in the first nine months dropped 22.5 percent to 59 million euros, accounting for 15.6 percent of the total. Growth in local customer purchases partially compensated for the significant decline in international tourism.
China was up 3.2 percent in the third quarter. In the first nine months, sales decreased 12.6 percent to 38.1 million euros, representing 10 percent of the total.
There was solid positive growth in Mainland China and Taiwan, fully compensating for the significant drop in traffic in Hong Kong and Macao.
The company is focusing on China as Cucinelli believes in the growth potential of the region for the monobrand and the multibrand channels. As a consequence, the company plans to open a select number of boutiques in the region, expanding venues and entering new specialty stores in the wholesale channel.
In the Rest of the World area, third-quarter sales declined 5.7 percent. In the nine months, sales fell 13.9 percent to 44.7 million euros, or 11.8 percent of the total.
South Korea performed well, but the region did not offset the reduction in turnover in Japan, which in the third quarter of last year had performed very well while awaiting the increase in value-added tax.
Sales in the retail channel fell 15.7 percent in the third quarter. In the first nine months, the retail channel registered a 26.1 percent decrease to 169.3 million euros, representing 44.7 percent of the total.
As of Sept. 30, the company had 107 boutiques, one less compared to the end of December last year. After the opening of the Paris and London stores, in September Cucinelli expanded the Shanghai boutique at the Plaza 66 mall. In Japan work has already begun on the Omotesando boutique, which will open between the end of this year and the beginning of next. In Russia a new St. Petersburg boutique will open in Nevsky Prospekt by the end of the year.
In the U.S., between the end of 2020 and the beginning of 2021, Cucinelli will double the square footage of the Madison Avenue flagship in New York and the Las Vegas Crystal boutique.
Sales in the wholesale channel rose 20.8 percent in the third quarter. Revenues in the nine months declined 8.9 percent to 209.6 million euros, representing 55.3 percent of the total.
Cucinelli touted the importance of a wholly Italian production chain; the strategic role played by the wholesale channel; the importance and resilience of the American market and a “domestic” orientation in all markets, as factors boosting the performance in the period.
Delivering the fall collection in a timely manner to wholesalers, leveraging the organization of the group’s supply chain and the employees’ willingness to work overtime were all key, according to Cucinelli.
The partnership developed over the years with about 500 wholesale customers “is based on a very clear principle that we try to put into practice every day: dedicate the same attention and care to third-party stores as if they were our own directly managed boutiques,” stated Cucinelli, noting that wholesalers now are inclined to plan for the next three to five years, with a more selective stance in a bid to have a clearer positioning.
The project to update the brand’s e-commerce web site and redesign the user experience will be completed by November, incorporating new technologies.