MILAN — Continued expansion in international markets helped Brunello Cucinelli SpA grow in the first nine months of the year, albeit at a slower clip than in the past.
The namesake entrepreneur during a conference call with analysts on Tuesday touted a more positive mood in Italy, expressed his confidence in the Chinese market, and introduced a new Internet project to offer the brand’s lifestyle experience online.
In the period ended Sept. 30, the Italian luxury brand saw net profit gain 1.2 percent to 25.7 million euros, or $28.5 million, compared with a normalized net profit of 25.4 million euros, or $34.3 million, in the same period last year, which included a capital gain of 755,000 euros, or $1.03 million, from the sale of a property in the first half of last year. Excluding that gain, the bottom line edged down 0.8 percent.
Revenues rose 14.5 percent to 317.6 million euros, or $352.5 million, compared with 277.3 million euros, or $374.3 million, last year. At constant exchange, sales rose 9.4 percent.
Chairman and chief executive officer Brunello Cucinelli defined the results as “beautiful” and said the winter collection is performing “very, very well” at retail. The entrepreneur said he considers the company a luxury apparel one, with accessories accounting for around 15 percent of total sales, which allows the brand to meet the market’s “strong request for luxury ready-to-wear.” He said that, for 2015 as a whole, he expected “sales and margins to be in line with the first nine months” and that he envisaged “a very positive 2016 and three-year period, with double-digit gracious growth.”
Cucinelli highlighted that 2015 concludes a three-year investment plan that doubled the square footage of the company’s manufacturing plant in Solomeo, Italy.
“We expect sales to rise 10 percent and EBITDA [earnings before interest, taxes, depreciation and amortization] proportionately in the next three years,” he said, noting that the company will return to ordinary investments, a total of 80 million euros, or $88.8 million, in the next three years, of which 33 million euros, or $36.6 million, will be spent in 2016.
In particular, the entrepreneur highlighted a “new, great Internet project,” initiated in 2014, and combining digital and IT, “working on three fronts, communication, e-commerc e– very important for the future and the nervous system of our industry.”
The goal is to offer online consumers the same experience a brick and mortar store would provide, “the atmosphere and uniqueness of the [Solomeo] village, a special packaging, a book on Solomeo, maybe a photo of something else that you may like.”
Cucinelli said he thought of “the physical and digital worlds as a single, integrated entity, so that we can combine identity and projects in a consistent manner.”
For this reason, the company is working on bringing back the e-commerce warehouse to Solomeo, beginning in 2017.
Cucinelli, who has tapped Francesco Bottigliero as chief digital officer, once again praised the merger between the company’s longstanding online partner, the Yoox Net-a-porter Group, and said he was very happy with the presence of the brand on Mr Porter and Net-a-porter, starting with the fall season. YNAP, he said, is “the best multibrand in the world, they know real luxury.” He said online sales account for around 4.5 to 5 percent of sales, of which 0.7 percent is derived from the Yoox boutique. He said he hoped in three years for online sales to account for “at least 10 percent of total. The change is so fast.”
In the nine months, EBITDA totaled 53.9 million euros, or $59.8 million, up 12.1 percent over the normalized figure last year.
Revenues increased 17.9 percent in international markets. Sales in the North American market gained 25.4 percent, reaching 114.3 million euros, or $126.8 million, representing 36 percent of the total. As of Sept. 30, the company had 21 stores in the U.S.
In Europe, sales rose 6.8 percent to 98.2 million euros, or $109 million, representing 30.9 percent of the total, driven both by locals and, increasingly, by high-end tourists, especially from Asia. The company noted that all of Europe, including the Mediterranean area, Eastern Europe, Russia and countries in the former Soviet Union, performed well, “thereby confirming the limited impact of the multiple changes of the economic and financial environment on high-end customers.”
In Greater China, sales rose 18.3 percent to 18 million euros, or $19.9 million, accounting for 5.7 percent of total revenues. There are 19 boutiques in the region, a number that has remained unchanged over the past 12 months. Responding to an analyst underscoring the company’s growth in the area compared with its peers, Cucinelli highlighted that the market is “still small,” and attributed the continued gains, also in Hong Kong, to the fact that the Chinese perceive the brand as “exclusive.” He said he was convinced China “will be a gigantic market, with a great economic and cultural growth. They are very fast and very connected. China in the future will be the motor of everything.”
In the Rest of World area, sales increased 33.6 percent to 27.1 million euros, or $30 million, representing 8.5 percent of the total.
Italy has shown encouraging signs of growth, said Cucinelli, continuing a trend seen in the first half. In the nine months, this market gained 1.9 percent to 59.9 million euros, or $66.5 million, representing 18.9 percent of the total. Cucinelli said the country’s major cities and resorts saw a surge in tourists from Asia and the Middle East, but that locals also have begun to shop again. “The sun is shining on Italy now, and there is a new, positive mood,” he mused.
The retail monobrand channel saw sales grow 34.5 percent to 135.8 million euros, or $150.7 million, representing 42.8 percent of total revenues.
Like for like retail sales gained 5.3 percent in the first 44 weeks of the year until Nov. 1.
The multibrand sales channel saw revenues increase by 3.4 percent to 153.6 million euros, or $170.5 million, accounting for 48.3 percent of revenues. The results were affected by the conversion, effective Sept. 1 last year, of the 13 dedicated spaces in luxury department stores to direct operations in Japan.
As of Sept. 30, Cucinelli had 116 stores worldwide compared with 104 at the end of September last year, with 12 openings in the past 12 months, including one in Tokyo’s Ginza in the last quarter.
Dollar figures were converted from the euro at average exchange rate for the periods they refer to.