Brunello Cucinelli

Cucinelli Stock Slide Signals Challenges for Luxury Sector

Downbeat Investor Reaction to Earnings Reflects Broader Concerns

Brunello Cucinelli SpA’s second-quarter earnings met expectations, but the market’s response indicates potential challenges ahead for Europe’s luxury goods companies. Despite the Italian cashmere house reporting “very promising” orders for its fall-winter collection, shares fell by as much as 2.3 percent on Friday due to the absence of a guidance upgrade. This reaction underscores investor worries about waning demand for high-value items.

Analysts’ forecasts suggest a tough results season for the sector, with profit estimates falling faster than those for the broader European market. Cucinelli, similar to Hermès International SCA, has benefited from catering to the uber-wealthy, who are less affected by economic downturns. The stock has performed relatively well this year with a 4.4 percent gain, unlike some peers like LVMH, which have seen declines. The MSCI Europe Textiles Apparel & Luxury Goods Index has dropped 13 percent from its peak earlier this year.

A major challenge for luxury firms is the pullback in Chinese demand after a post-pandemic spending surge. This has led some high-end labels to reduce prices in China to clear unsold inventory, with companies like Kering SA, LVMH, and Burberry Group Plc resorting to discounting.

Burberry and Richemont are next to report, with analysts already predicting a lackluster second-quarter. Bryan Garnier analysts anticipate first-half profits will be affected by China’s worsening economic situation, with mid-range brands like Swatch likely bearing the brunt.

LVMH, owner of brands such as Louis Vuitton, Bulgari, and Givenchy, has seen its price target cut by several brokers due to expectations of muted second-quarter growth. Its shares are down almost 2 percent this year.

Despite these broader concerns, Brunello Cucinelli reported positive results for the first half of this year, with a 14.1 percent increase in preliminary revenues. Sales until June 30 totaled 620.7 million euros, up from 544 million euros the previous year. Quarterly revenues were also strong, with 312 million euros reported in the second quarter compared to 309 million euros in the first quarter.

Co-CEOs Luca Lisandroni and Riccardo Stefanelli attributed this growth to balanced increases across all sales channels, geographic locations, and gender divisions, with men’s and women’s clothing each contributing 50 percent to total sales.

For July, the company maintained its growth trend, particularly in the Americas, which saw a 19.4 percent revenue increase to 225.6 million euros, accounting for 36.4 percent of total sales. European revenues grew by 9 percent to 21.1 million euros, making up 35.6 percent of total sales, while Asian sales rose by 14.3 percent to 174 million euros, representing 28 percent of total sales.

Global retail sales increased by 14.7 percent to 395.2 million euros, making up 63.7 percent of overall sales.

The company is also expanding physically, with new store openings planned for Toronto, Wuhan, and an expanded boutique in London by the end of the year or early 2025. Additionally, a manufacturing plant in Solomeo is set to double in size, with new outlets in Italy also underway.