MILAN — Boosted by strong sales growth in the U.S., Europe and China, Brunello Cucinelli SpA said Thursday that 2015 net profit increased 5.4 percent, raised its annual dividend and outlined a retail expansion plan that will see it open six to eight stores annually over the next three years.
In a statement released after the close of trading in Milan, where Cucinelli is listed, the company said adjusted net income reached 33 million euros, or $36 million, last year.
Net revenues rose 16.4 percent in the year to 414.2 million euros, or $452.3 million. At constant exchange, revenues increased 9.5 percent. The company published preliminary 2015 sales figures on Jan. 11.
Founder and chief executive officer Brunello Cucinelli said 2015 was a “splendid” year for the industry during which the company managed to strengthen the Cucinelli identity. Looking ahead, he said following the success of the just-ended winter campaign, “we can imagine a particularly positive and serene 2016 with a fair double-digit growth.”
According to company figures, international markets make up nearly 83 percent of Cucinelli’s annual sales and in these markets revenues jumped almost 20 percent. Italy, which accounts for 17 percent of sales, also put in a “very positive” performance, with sales increasing 3.6 percent.
In North America, Cucinelli’s single-largest market accounting for some 38 percent of revenues, sales increased 27.4 percent, while in Europe — which, together, accounts for 48.4 percent of company turnover — sales rose almost 11 percent. Greater China, which makes up a still relatively small 6.2 percent of turnover (a slight increase from 2014) put in a 23.3 percent sales gain.
All channels performed well, Cucinelli said, with the company’s 81 directly operated stores — which account for more than 46 percent of total revenues — putting in a particularly strong 30 percent sales increase over the previous year. Like-for-like sales in stores open at least one year in January and February increased by 4.1 percent, Cucinelli said. Wholesale monobrand stores — which account for some 8 percent of overall turnover — put in a more modest 8.1 percent sales gain, while multibrand wholesale (department stores) — which account for about 45 percent of turnover — saw revenues in the year increase by 6.3 percent.
During a conference call following the results, Cucinelli reiterated that 2015 marked the end of the company’s three-year, 120 million euro, or $131 million, investment plan, which included the refurbishment or extension of all the company’s showrooms and the expansion of the directly operated store network “in the best cities, and honestly speaking we can’t say they come cheap.” Net debt, the cashmere maker’s founder said, was 56 million euros, or $61.2 million, at the end of 2015, equal to 13 to 14 percent of sales.
During the call, Cucinelli said he sees double-digit growth in revenues and increasing earnings before interest, taxes, depreciation and amortization, which increased 11 percent in 2015, reaching 69.1 million euros, or $67.6 million.
He said the company will invest some 33 million to 34 million euros, or about $36 million at current exchange, over the 2016 to 2018 period. “We will be targeting fair growth and also a slight improvement in margins with fairly good cash generation,” he said.
In terms of developing the retail network, Cucinelli said the company was targeting about six to eight store openings a year over the next three years. This year he said the plan was to open “a couple of locations in America, a couple around Dubai and Singapore and one each in Japan and Europe.”
Asked about store sizes, he said the company would continue with its strategy of large stores in big cities, smaller sizes for second-tier cities and still smaller stores in resorts. “I prefer a smaller store that is a busier store, rather than a two-story store with not much traffic. I prefer busy stores.”
He also revealed the company will be launching its own e-commerce site in 2017. Cucinelli operates a monobrand store through Yoox Net-a-porter Group. The project is still in its infancy and he did not say whether or how it would impact its partnership with Yoox, although on Wednesday, YNAP ceo Federico Marchetti said the contract with Cucinelli was not being renewed.
“We still enjoy an excellent relationship with Yoox Net-a-porter and Mr Porter,” Cucinelli said Thursday. He cited the e-commerce initiative as part of a major overhaul of the company’s Web site: “In 2016, we will complete this major digital project, very relevant for e-commerce, which will play a very important role in the future,” Cucinelli said.
Speaking more broadly, Cucinelli said he saw two paths for makers of consumer goods: On the one hand, there will be companies producing very manually skilled, recognizable (but logo-free) and very expensive products that will not be so easy to find, while on the other, there will be industrial products, largely distributed, manufactured at a very good price and in larger volumes.
Cucinelli pointed to the vast potential of the Chinese market, but he also warned that some practices by luxury goods makers were not well received by Chinese consumers. “Especially the very well-off, I think, are pursuing exclusive, expensive, logo-less products, but at fair price and not different to prices in the rest of world.” He said he believed the Chinese were “disappointed” by these price differentials.
He also said that “after purchasing large quantities of accessories, they [Chinese consumers] want to buy ready-to-wear, European and American apparel and this is what will ensure great results in the future for the Italian and French rtw industries.”
Cucinelli also commented on the U.S. market, the company’s single largest. “I find it is a very demanding market,” he said. “I think America has achieved a very high level of taste, for both men and women, and in our view what makes the difference is the product, the product rules.”