MILAN — Gains across all markets worldwide contributed to a growth in profitability and sales at Brunello Cucinelli SpA in the first quarter and the namesake founder expects double-digit increases for the remainder of the year — one that he defines as “beautiful, also in terms of product and image.”
“We are particularly happy with the way 2015 started off, in light of the very positive orders so far and summer sellouts and we can confirm a double-digit growth for the year,” Cucinelli said during a conference call with analysts.
The Italian luxury company said adjusted net profit rose 3.3 percent to 9.3 million euros, or $10.5 million, compared with 9.1 million euros, or $12.4 million, in the same period last year. This is net of an extraordinary sale of a non-strategic industrial building in the first quarter of 2014 for 750,000 euros, or $1.02 million. Including that capital gain, net profit decreased by 2.3 percent.
In the January-to-March period, revenues at the Solomeo, Perugia-based brand jumped 12.1 percent, reaching 111.7 million euros, or $126.2 million, compared with 99.6 million euros, or $136.5 million.
Cucinelli, who is also chairman and chief executive officer of the firm, said “in light of the very positive results reported in the first quarter, having already collected all the orders for a fascinating next autumn/winter season and considering the significant spring/summer sellout, we can expect our double-digit ‘pleasant’ growth to be confirmed for the current year. Moreover, this is the last year of the three-year plan of great investments; thanks to them, we now feel that our company rests on sound foundations and keeps focusing on the ‘artisanal’ Made in Italy we believe in so much. We perceive that the people we work with, both in Italy and abroad, are starting to show renewed positivity and excitement for everything that comes from our land.”
The entrepreneur also said he expected the impact of foreign exchange rates in the year to be “in line with the first quarter.”
Sales outside Italy rose 15.2 percent, representing 79.1 percent of revenues. Italy also showed growth, gaining 1.7 percent. As of March 31, the company had 75 directly operated boutiques.
Revenues in the U.S. rose 34 percent to 34.5 million euros, or $39 million, representing 30.9 percent of the total, boosted by existing boutiques and the contribution made by three openings over the past 12 months — in Atlanta, San Francisco and New York — and at wholesale, driven by the sellout in top department stores.
In Europe, sales grew 5.5 percent to 35.2 million euros, or $39.7 million, representing 31.5 percent of the total. Of note were openings in Vienna, Frankfurt and Paris. “Top-end tourism flows were stable (as always less subject to any volatility that may be caused by macroeconomic and currency dynamics), while the results of sales in Russia also remained solid, both in relation to the performance reported by the multibrand boutiques and with respect to the collection of orders for the fall/winter 2015 collections,” said the company in a statement released after the close of trading in Milan, where it is listed.
In Greater China, revenues increased 10.2 percent to 6.9 million euros, or $7.8 million, accounting for 6.2 percent of the total.
In the Rest of the World area, sales were up 3.8 percent to 11.7 million euros, or $13.2 million, accounting for 10.5 percent of the total. The performance was affected by the conversion of the business in Japan to directly operated stores since September 2014.
In Italy, sales grew 1.7 percent to 23.4 million euros, or $26.4 million, representing 20.9 percent of the total, driven by the performance of boutiques in leading cities and resorts, benefiting from tourist flows and local purchases.
Earnings before interest, taxes, depreciation and amortization were up 9.5 percent to 19.2 million euros, or $21.7 million, compared with normalized EBITDA of 17.5 million euros, or $24 million, that did not include the extraordinary gain. Including the gain, EBITDA rose 5 percent.
Dollar amounts have been converted at average exchange for the periods to which they refer.
As of March 31, the company had a net financial position of 68.2 million euros, or $77 million, compared with 28.3 million euros, or $38.7 million, at the end of March last year.
The multiyear investment project began in 2013 and will be completed by 2015 and also channeled funds to expand the Solomeo headquarters. The project totals about 115 million euros, or $130 million. Capital expenditures of 13.6 million euros, or $15.3 million, were made in the quarter ended March 31, compared with 12.9 million euros, or $17.6 million, in the same period last year. Of this figure, commercial investments in retailing totaled 9.1 million euros, or $10.2 million, and investments relating to production and logistics, including a technological platform to be completed next year and investments to strengthen the digital presence of the brand, amounted to 4.5 million euros, or $5 million. “We confirm a yearly investment of 25 million euros [$28.2 million] for the next three years and we imagine to generate cash in a progressively growing way. We had three years of growth following the IPO and now [we expect] three years of cash generation,” Cucinelli said.
During the call, Cucinelli observed that he strongly believed in online sales, with the recent goal to strengthen that channel. He congratulated Yoox founder Federico Marchetti on the merger deal with Net-a-porter, praising the “beautiful image and great quality” of the platform, the “most beautiful boutique online,” and touting the brand’s arrival on Mr Porter and Net-a-porter in mid-June. Perhaps the next challenge is to highlight the message of a “unique and artisanal” product online, said Cucinelli, “conveying the same atmosphere of the stores on the Internet. We would like for a customer who buys a 4,000-euro coat to have their name written on it by hand, or a special packaging, or a book on Solomeo to communicate our structure.”
As of March 31, net debt stood at 68.2 million euros, or $77 million, compared with 28.3 million euros, or $38.8 million, at the end of March last year, in line with the seasonality of business and the company’s investments, said the company.