Half Year 2024 Brunello Cucinelli SpA Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Andrea Randone - Intermonte - Analyst : (interpreted) Thank you and good evening. I have three questions. The first one, you and Luca mentioned it about the outlook on the different geographies, but there is still a lot of discussion ongoing about Asia. We know that you can only talk about your specific segments, but maybe you can spend a few more words. You mentioned Mainland China. Maybe you can talk about Korea, Japan, some general considerations. Brunello Cucinelli - Brunello Cucinelli SpA - Chairman of the Board, Chief Executive Officer, Director of Style and Creativity (interpreted) Luca will answer this. Second?

Question: Oriana Cardani - Intesa Sanpaolo - Analyst : (interpreted) Yes. Good evening, everyone, and thank you for your time. I have two questions. The first one concerns the communication events part. So, you have a pretty busy agenda that you presented. I was wondering, about the second half of the year, the expense costs, communication costs, could they be higher? Brunello Cucinelli - Brunello Cucinelli SpA - Chairman of the Board, Chief Executive Officer, Director of Style and Creativity (interpreted) No, no, no, Oriana. This is -- everything you heard is budgeted for. What does not change -- what does change is our weight, because we take part in so many dinners. But you see, we believe that this is very important for the image of Solomeo, the image of the product and ourselves. But this will, is not bound to change. No expenses in communications, no significant change there. And I think that we got the autumn, fall, winter communication right. I don't know whether you saw all the images of the great ladies in history, a gentle luxury, that's for sure. Yes. And also a very nice statement on gentle luxury, as a symbol of tailored beauty, and a symbol of living according to measure -- within measure. We need to go back to that. And I believe that in apparel, clothing too, we are going, striking the balance again or going back to balance. Because some people are saying, well, things are not going that well. Well, you see, if you have EUR10 billion and if you can confirm your EUR10 billion, I don't think that's too bad. But this is just my thoughts. And maybe three years, four years ago, you had EUR3 billion. So, Oriana, one thing is sure, in 2019, nearly all of us were -- you were having half the revenues and half the equity -- stock price on the stock exchange. So, where if we now we go back to normal somehow, that's everything is very much very balanced, I would say.

Question: Oriana Cardani - Intesa Sanpaolo - Analyst : (interpreted) Thank you. Thank you very much.

Question: Melania Grippo - BNP Paribas - Analyst : (interpreted) Good evening, everybody. Melania Grippo. First of all, congratulations on your results. I have three questions myself. One on the tax rate guidance. If you can tell us what your expectation is for the full year, because the first half was slightly higher than my expectations, then openings in the second half of the year. How many do you have in mind and a few details? And then about the kids' collection, if you can provide some more colors on revenues and what do you expect this collection, how do you expect it to grow? Brunello Cucinelli - Brunello Cucinelli SpA - Chairman of the Board, Chief Executive Officer, Director of Style and Creativity (interpreted) I can talk about the kids' collection, Brunello says. So, as to kids, we have our collection with 33, 34 clients. It is a mini-me collection for us. We are very pleased with how things are going. It is a great project. We do not show it across all the different stores, because we need space to showcase that collection too. It's part of our balanced growth. We have many well-off young people who buy kids clothes, of course, and a blazer for a child costs more or less the same as one for a grown-up. But the taste is very much in keeping and in line. As to openings, let me give you an answer. Toronto, a great mall, opened a few days ago. One, the FAP, this great chain of department stores, SKP -- sorry and at the end of the year, we would like to expand the Bond Street store in London. So, the aim is always the same. We want to have two, three, four openings, depending on where you need to find the location first, and then four, five, either we redo the store or we expand it. Considering that in the first half, we only opened Miami, this year is complete. And for 2020 -- well, 2025, it is all basically secured in contracts. Dario?

Question: Melania Grippo - BNP Paribas - Analyst : (interpreted) Thank you very much. Brunello Cucinelli - Brunello Cucinelli SpA - Chairman of the Board, Chief Executive Officer, Director of Style and Creativity (interpreted) Great. Thank you, Melania.

Question: Louise Singlehurst - Goldman Sachs - Analyst : Hi. Good evening, everyone. Thank you for taking my question. I'll just keep to one question, please. I wondered if I could confirm a comment on the call with regards to the commentary by region. I think you said that there was no change in July and August by region to call out from the July the 11, conference call. And secondly, on that, I wanted to ask about the expectations for the second half and what area or region gives you most concern for the slowdown implied for the 10% for the full year after the 14% in H1? Thank you.

Question: Chris Huang - UBS - Analyst : Hello. Hi. Good evening and congratulations on the results. I have two questions, please. Firstly, I'm sorry to just come back at the comments on July and August, if we can get a little bit more color from a quantitative perspective, if you are able to at least provide some directionally color on whether growth is roughly in line with the kind of number you printed in Q2, I think, 14% in retail or is this seeing any kind of moderation we should be aware of? Secondly, on the EBIT margin, I think the previous guidance on the previous call for the four-year is to see an EBIT margin expansion of around 20 bps to 30 bps. On the back of the very strong H1, are you expecting this to change, because if we do the math, 20 bps to 30 bps for the four-year now basically implies H2 margin to be down. So very keen to hear your thoughts on that. Thank you very much. Brunello Cucinelli - Brunello Cucinelli SpA - Chairman of the Board, Chief Executive Officer, Director of Style and Creativity (interpreted) Okay. Excellent, Chris. So as far as EBIT is concerned, we're going to have a beautiful year, hopefully. So to be very honest with you, we expect a very good year. So that's why in the second half we expect results to be there. So we're not working under stress, we're not constantly hunting for the next 10 bps or 20 bps. So that's the spirit. This is the only way for us to have creativity at play day in, day out. So, the company is very creative as we speak, but this freedom of creativity also comes because we are not obsessed with the desperate hunt for the last 10 basis points or 20 basis points. I mean, if we only look at the next three months, we may be very good in the eyes of some investors, but we're not serving the best interest of the company. We're serving the best interest of the company if we know what we're going to do in the next 3 years, 5 years, 10 years, and this is the result we have obtained with all of our inventions, including the big Novelty of the new website. So Chris, we're right on track. Come see us as soon as possible.

Question: James Grzinic - James Grzinic - Analyst : (interpreted) Well, good afternoon, everyone, and I also wish to congratulate you for your results. I have two quick questions. So the first is, when you were talking about current trading, I think you were making a distinction between Mainland China's demand versus global Chinese demand for this cluster. I know you're less subject than other houses to travel spending, but is there any change in August there? Brunello Cucinelli - Brunello Cucinelli SpA - Chairman of the Board, Chief Executive Officer, Director of Style and Creativity (interpreted) No. Actually, to tell you the truth, we are, I mean, wherever we go, it's full of people. The little town where I was born is out in the middle of nowhere. Solomeo is even further out in the middle of nowhere and that's now full of people. And Sardinia is even more full. So wherever we travel, we see people traveling everywhere. Tourism is flowing everywhere. So, of course, you need to have beautiful products, beautiful store windows. You need the right timing too, because if you walk into a store where people are nice and friendly and welcoming at least I'm speaking of our customers, they tend to be pretty well-off people and they want to be properly welcomed. So I recently went to a restaurant where I spent EUR500 and the wine list was like EUR2,000 for a wine which is worth EUR200, EUR250 for the wine we buy for our company. And I know it costs EUR25. So at the end, they said, well, will I see you next week? And I said, I am afraid you'll never see me again. So we need balance here. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 28, 2024 / 4:00PM, BCU.MI - Half Year 2024 Brunello Cucinelli SpA Earnings Call We need to strike a new determined balance. Actually, we do have affluent people. They are wealthy. They have a high spending capacity. But if they turn their back on you, they'll never come back to your store again. So if I want to buy a car and I know your EBIT on the car is ridiculous, I'm not going to buy it. I mean, we need more balance. There's a new sensitivity. So we have people everywhere. We have travelers and tourists everywhere. You can't find a sleeping anywhere. I went to a little hotel and I paid EUR4,900 where you would buy normally sleep for EUR1,700, and I said, I'd rather sleep in my car. I feel -- I'm being tricked. I'm being swindled. So we need to strike a new balance, all of us. Especially when you read everything about everyone. So if you see that things swing wildly in such a short period of time, I mean, it feels like you're being swindled. It's like the restaurant example. So yesterday I was watching TV in Italy and I was looking at a watermelon that sells for EUR45, a spaghetti that sells for EUR40. I mean, it doesn't make sense. It's ridiculous. So we do manufacture costly products, expensive products, but we still need balance. And I'm saying this for us in the fashion industry on a very friendly basis, in very friendly terms. So from 2019 to today, our EBIT increased from 19% to 28% in our industry. So you, analysts, investors, ourselves, do we all think it's normal? I think it's not. I think we need to strike a new balance. Personally, I'm not prepared to be swindled, to overpay something. I mean, if prices are out of this world, I may buy something which is really expensive, but it must be worth it. I don't want to be ripped off.