MILAN — Brunello Cucinelli struck an upbeat note on Wednesday evening as he commented on his namesake company’s solid performance in the first half, leveraging trends he believes are entirely in sync with his brand’s style.
“This is a very good moment for us, there is a shift toward a taste in men’s and women’s wear that is very suitable to what we do — less garish, more chic and understated, in line with our nature,” touted Cucinelli. “Customers tell us we are a beacon.”
This confidence allowed Cucinelli to “serenely” expect a “particularly positive 2019 with revenues increasing in line with our long-term expectations, an 8 percent annual growth resulting in doubling our sales over the next 10 years — along with a more than proportional increase of EBITDA, with healthy and rising profits.”
A champion of human dignity and sustainable growth, Cucinelli also took the time to express his satisfaction and congratulate companies on the “historic agreement” inked earlier in the month in the U.S. by members of the Business Roundtable and its statement on the purpose of a corporation now being “to create value” for all members of society, not just shareholders. The statement was signed by chief executive officers of major companies ranging from Walmart Inc. to J.P. Morgan Chase & Co.
“This is a great step in the 21st century and a great gift for the future,” he said.
Cucinelli was speaking to analysts at the end of trading in Milan, where the company is publicly listed, after reporting growth in all geographic markets and channels in the first six months of the year.
Net profits were impacted by a higher tax rate, but earnings before interest, taxes, depreciation and amortization, operating profit and revenues all showed growth in the period ended June 30. The figures were revised to eliminate the effects of the new IFRS 16 accounting standard.
Normalized net profits, excluding the fiscal benefits of the Patent Box, amounted to 22.8 million euros, down 4.3 percent compared to 23.8 million euros at the end of June last year, affected by a tax rate of 31.1 percent, compared with 28.5 percent in the corresponding period in 2018.
Including the Patent Box fiscal benefits, profits in the first half totaled 25.3 million euros, a 2 percent decrease, compared to 25.8 million euros last year. “With production in Italy and being very much in love with the country,” Cucinelli said the 30 percent tax rate was “fine” by him.
Revenues in the first half of 2019 climbed 8.1 percent to 291.4 million euros, compared with 269.5 million euros last year.
Sales in Italy rose 1.1 percent to 44.3 million euros, representing 15.2 percent of the total.
Revenues in Europe climbed 9.7 percent to 92.4 million euros, accounting for 31.7 percent of the total.
In North America, sales rose 9 percent to 94.1 million euros, accounting for 32.3 percent of the total, lifted by local and top-end tourism in both channels.
In China, revenues were up 15.9 percent to 28.8 million euros, representing 9.9 percent of the total. Asked about Hong Kong, Cucinelli, who will be traveling to China next week, was unfazed, “happy with the performance” and characterizing it as “not a large business.” He also noted that each year, the company sets up a budget “always taking into account” potential issues. “Shanghai, Beijing, Chengdu are all performing very well, I don’t see a problem and am confident for the rest of the year,” Cucinelli said.
Sales in the Rest of the World area grew 5.3 percent to 31.8 million euros, accounting for 10.9 percent of the total, with a solid performance in South Korea and Japan.
Earnings before interest, taxes, depreciation and amortization were up 7.9 percent to 49.9 million euros, with a margin of 17.1 percent, in line with last year. The growth was lifted by the solid business performance and the increase in like-for-like sales, the positive sell-outs and price-mix, the company said.
The retail monobrand channel showed growth of 12 percent to 149.9 million euros, accounting for 51.5 percent of the total. Like-for-like sales grew 3.7 percent. Cucinelli underscored the “value of physical stores, especially in luxury,” and said he has established a school for sales associates in Solomeo, the company’s headquarters. “They should be brand ambassadors, fascinating and charming,” he contended.
As of June 30, the company had 102 boutiques. Three new banners opened in the first half and there were two conversions from the wholesale channel. Next year, the company will open a 5,400-square-foot store in London, revealed Cucinelli, adding that he has been “looking for a space in Paris for years,” too.
The wholesale monobrand channel reported sales of 18.2 million euros, up 1.7 percent, with 28 boutiques compared to 29 at the end of June last year.
In addition to underscoring the importance of visual merchandising and constantly renewing showrooms and stores, Cucinelli said that the floor area of the brand’s boutiques now must be in the order of 4,320 to 4,860 square feet for its flagships and of 2,700 to 3,240 square feet for units in the major luxury cities, to fully present the label’s range and lifestyle.
The wholesale multibrand channel grew 6.5 percent to 123.3 million euros, accounting for 42.3 percent of the total.
Investments in communication rose 10.1 percent to 16.2 million euros, representing 5.6 percent of sales. “I learned from [former Luxottica ceo and current Eataly chief] Andrea Guerra that investments of between 5 and 6 percent of sales are necessary to be contemporary and now even more [are required],” Cucinelli said. Investments were also channeled into extending the kids’ collection, the bespoke offer and the online development.