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Brunello Cucinelli little hit by Covid-19 crisis in Q1
After years of regular growth, Brunello Cucinelli said it recorded a slight downturn in revenue at the start of 2020, caused by the effects of the Covid-19 crisis. Between January and March 2020, the Italian luxury label specialised in cashmere generated a revenue of €156.7 million, down 2.3% compared to the same period a year earlier (and down 2.9% at constant exchange rates). Brunello Cucinelli held its own chiefly thanks to its strong position in the wholesale channel, which performed well and accounted for half of the label's revenue.
The label’s sales declined in all of its markets except for North America - a region which accounts for 32.4% of its total revenue - where revenue grew 9.5%, and for the rest of the world, where sales were up 6.6%. As Brunello Cucinelli explained in a press release, sales were upbeat until February, and were then impacted by the closure of all its monobrand stores following the lock-down measures to halt the spread of Covid-19.
In China, the first country to introduce stringent anti-coronavirus measures, Brunello Cucinelli sales plummeted, losing 27.1%. In Italy, which accounts for a 15.6% share of total revenue, sales fell by 13.9%, while they were down 2.2% in the rest of Europe. The label said there are initial signs of improvement in China, where the health situation is normalising.
Brunello Cucinelli’s direct retail channel, with 107 monobrand stores which account for 42.1% of total revenue, recorded a 7.2% slump compared to Q1 2019. The results of franchised stores were stable, up 0.4%, while sales to multibrand clients and department stores, which altogether account for 50.7% of total revenue, increased by 1.8% to €79.5 million.
The label’s eponymous founder and CEO, Brunello Cucinelli, said these are “extremely critical times, a situation very different from that of 2008.”
However, he noted the label has reached “a revenue virtually equivalent to that of the first quarter 2019,” and that “wholesale orders for the Fall/Winter 2020-21 are very substantial.”
Considering the situation, Cucinelli said that the work they are doing is now split in two major strands: the first relates to managing the current year, and the second to developing the strategy for 2021 and 2022. This year, “the extent and depth of the crisis make it impossible for us to fully reach the targets we set ourselves for 2020,” he said.
But the way the company is organised allow Brunello Cucinelli to look to the future with confidence, thanks to the flexibility of its Italy-based production structure, to the solid ties it enjoys with its suppliers, the central role played by the wholesale channel, and the company's low level of indebtedness and strong links with its clients.
The company also announced that the AGM has been pushed back from April 23 to May 21, and that the proposal to distribute a dividend for the 2019 financial year has been withdrawn.
Together with the quarterly results, Cucinelli published an open letter “for these new times,” in which he says he is sure humanity will change, and that he regards the current crisis as “a wonderful opportunity.”
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