MILAN — Brunello Cucinelli on Wednesday struck an upbeat note on global business and on China in particular despite the recent drops in the equities markets and an economic slowdown in that region. Speaking during a conference call with analysts about the performance of his namesake company in the first half of the year, the entrepreneur trumpeted “a great cultural and economic growth in the next decades in China.” Cucinelli said he believes the government there is working on “making the [country’s] growth sustainable,” and that he was “serene and confident in the short- and long-term about China.” While admitting the Chinese market is “still very small,” as the Greater China area accounted for 6 percent of total sales in the first six months of the year Cucinelli underscored its continuous growth and its 14.5 percent gain in the period.
All geographical areas lifted Brunello Cucinelli SpA’s profitability and revenues in the six months ended June 30. Net profit rose 2.7 percent to 15.5 million euros, or $18.1 million, compared with normalized earnings of 15.1 million euros, or $20.6 million, in the first half of 2014. This excludes a capital gain of 755,000 euros, or $1.03 million, from the sale of a property in the first half of last year. Including the capital gain, net income for the first half of 2015 was in line with that of last year.
In the first six months of 2015, sales gained 13.9 percent to 200.3 million euros, or $234.3 million, compared with 175.8 million euros, or $240.8 million, as reported in July. At constant exchange rates, revenues would have risen 9.3 percent.
Earnings before interest, taxes, depreciation and amortization grew 11.8 percent to 33.4 million euros, or $39 million, compared with normalized EBITDA last year of 29.9 million euros, or $41 million. Including the capital gain, EBITDA rose 9 percent compared with 30.6 million euros, or $42 million, in the first half of 2014. Cucinelli said that he expected EBITDA in 2017 to represent 17 percent of sales, “more than proportional with the growth of revenues.”
“We are very satisfied with this first half of the year. We see these numbers as ‘excellent,’ and since two-thirds of the year have already gone by, we can envisage a beautiful year-end,” said Cucinelli, who is chairman and chief executive officer of the luxury fashion firm he founded. During the call with analysts, Cucinelli said this season was “really beautiful” and defined the year 2015 as “very important” for the brand.
“We are about to complete the significant 2013-15 three-year investment plan, which has enabled us to strengthen our company for the years to come. The spring/summer 2016 sales campaign is drawing to a close, reporting particularly positive results. Collections have received excellent feedback. Based upon this, we can envisage a very interesting 2016 too, with double-digit growth. We are deeply convinced, with a sense of responsibility but also with extreme serenity, that our company’s business strategy — based on apparel products featuring high quality, craftsmanship, manual work, exclusivity, elegance and contemporary character — will still be the keystone making our Made in Italy always appreciated, sought-after and leading worldwide.”
Revenues in the North American market climbed 25.8 percent to 69.7 million euros, or $81.5 million, accounting for 34.8 percent of the total.
Europe rose 5.3 percent to 63.2 million euros, or $74 million, representing 31.6 percent of the total. Cucinelli noted the “strong and special movement of tourists” in European resorts, and “especially in Italy,” citing shoppers from the Middle East, South America, Russia and America. Sales in Italy increased 1.8 percent to 36.9 million euros, or $43.1 million, representing 18.4 percent of the total.
The Rest of the World area grew 36 percent to 18.7 million euros, or $22 million, representing 9.3 percent of the total.
The results are affected by the conversion of the business in Japan to the retail channel, from three wholesale monobrand boutiques and 13 points of sale in top luxury department stores to direct operations starting Sept. 1, 2014. A flagship is due to open over the first few days in September in Tokyo’s Ginza district, said Cucinelli.
The retail monobrand channel rose 36 percent to 84.8 million euros, or $99.2 million, representing 42.3 percent of the total. Like-for-like sales grew 5.1 percent in the first 33 weeks of the year, until Aug. 16. As of June 30, the direct monobrand network comprised 79 boutiques, compared with 65 units at the end of June last year.
The multibrand sales channel rose 2.2 percent to 93.6 million euros, or $109.5 million, representing 46.7 percent of the total, affected by the conversion to the retail channel in Japan.
As of June 30, the monobrand network comprised 115 boutiques, with 13 openings taking place over the past 12 months.
In the first half, investments made in communications rose 6.6 percent to 9.6 million euros, or $11.2 million.
As part of the company’s three-year plan of investments of about 118 million euros, or $138 million, and initiated in 2013, which also included doubling the production facility in Solomeo, in central Italy, capital expenditures in the past 12 months amounted to 37.9 million euros, or $44.3 million. Of these, 20.7 million euros, or $24.2 million, were invested in the first six months of the year.
Investments relating to production and logistics amounted to 5.9 million euros, or $6.9 million, compared with 12.2 million euros, or $16.7 million, in the same period last year, mainly to support the technological-digital platform, which began last year and will be completed in 2017.
Dollar figures were converted from the euro at average exchange rate for the periods they refer to.
Cucinelli during the call highlighted the relevance of the Internet and a digital presence for the company, as he complimented Yoox Group founder Federico Marchetti on the merger with Net-a-porter and both platforms for their sites, which carry his brand. He said he believed in the firm becoming a “digital consultant,” responding to specific requests by the brand’s customers “especially about what to wear during moments of relaxation” and offering shopping advice. “Internet is the biggest phenomenon in three or four centuries,” he said.
Asked by one analyst if the company is trying to lower its rents, similarly to competing firms, Cucinelli said the company pays “contemporary” prices in light of the high number of competitors vying for the same prestigious spaces.