MILAN — Brunello Cucinelli has a dream, which he confessed to analysts on Wednesday as the company that bears his name reported a 13.4 percent spike in net profits last year. “I would like the company to be owned by the family for centuries — although it won’t necessarily be managed by it. I have always said you inherit the property, but not the management.”
Cucinelli is a rare breed in the industry, taking the time to talk to analysts quoting a Russian author urging them to look at the sky and the stars when feeling downcast or in the throes of “an interior storm,” or pointing to the recent meeting of the North and South Korean leaders to “make peace.”
But his vision and strategy are crystal clear and razor-sharp and have served him well so far. “Exclusivity” is his mantra, as well as “keeping product modern and contemporary,” which he reiterated throughout the conference call with analysts at the end of trading in Milan, where the company is publicly listed.
His company continued to grow in 2017, with net profits reaching 42.1 million euros, excluding the benefits of the Patent Box tax break linked to intellectual property. This compared with 37.1 million euros in 2016, and was lifted by all main markets and distribution channels. The tax charge excluding the benefits from the Patent Box in the year was 17.3 million euros, equivalent to a tax rate of 29.2 percent, compared to a charge of 16.3 million euros in 2016.
Including the fiscal benefits arising from the Patent Box in taxation, the tax rate fell to 11.7 percent, with 2017 net income rising to 52.5 million euros, an increase of 41.4 percent over the previous year.
The benefits from the Patent Box in 2018 and 2019 are seem in line with 2017, said chief financial officer Moreno Ciarapica.
In the 12 months ended Dec. 31, earnings before interest, taxes, depreciation and amortization rose 11.8 percent to 87.5 million euros, driven by the growth of business, a 4.4 percent increase in like-for-like sales, an evolution of the channel mix, with retail channel revenues rising to represent 53.7 percent of total from 49.6 percent of the total in 2016.
Revenues last year totaled 503.6 million euros, up 10.4 percent compared with 456 million euros in the previous year.
Cucinelli said the good performance of the company’s spring collection, “the excellent sales campaign in fall — which is now coming to an end — and the very special feedback from the national and international trade press, seem to indicate that yet another positive year lies ahead, featuring double-digit growth in terms of both revenues and profit.” The year 2018 marks the 40th anniversary of the company.
Ciarapica and Cucinelli highlighted careful hedging activities to cover the risk of foreign exchange rates’ volatility to maintain healthy margins. Cucinelli expects double-digit growth in sales and a more than proportional growth in EBITDA in 2018. In the 2019 and 2020 period, he forecast a “growth in line, with an EBITDA slightly superior to the growth of sales,” and a positive net financial position.
Investments are expected to total 120 million euros to 130 million euros in the 2018 to 2020 period. In 2018, they are forecast to total around 45 million euros.
Last year, investments in communication rose to 28.7 million euros from 24.7 million euros, mainly due to an acceleration in digital investments. Cucinelli, who has repeatedly spoken of “humanizing the web,” said once again that he did not wish to annoy customers through invasive digital communication but said he was “sure online sales will increase” and that the company is setting in place the right structures to tackle the growing business with sophisticated technology while working on avoiding the “massification of the image.” He once again praised partners Mr Porter and Net-a-porter as well as Mytheresa.com, but expressed some doubts about the luxury content of Farfetch, which he sees more as “a marketplace.”
Commercial investments of 26.5 million euros were channeled into the selective openings of boutiques, an enlargement of some existing boutiques, the renovation of existing spaces, a number of conversions and an enlargement of the floor space in department stores. The plan is to open three to five stores a year. Upcoming in 2018 are units in Dubai, Las Vegas, Beijing and a repositioning in Monaco. “We are committed to investing in our commercial spaces and showrooms, even with small changes. The product looks old in an old space,” Cucinelli said.
Investments in production, logistics and IT and digital amounted to 9.2 million euros.
At the end of December, net debt was reduced to 15.7 million euros, compared with 51 million euros at the end of 2016.
Cucinelli revealed a dividend of around 40 percent of profits in 2018, proposing a dividend of 0.27 euros per share.