Cucinelli Sees Rosy 2014 Amid Strong Demand for Exclusivity

Brunello Cucinelli said he’s optimistic about his namesake cashmere clothier’s prospects amid strong demand for the most exclusive luxury goods.

“I’m very confident -- not just for our company -- but for the high end of the market in general,” Cucinelli said in a phone interview last week. “I see a very rosy future.”

Cucinelli, based in Solomeo, Italy, last month forecast revenue and profit will rise at least 10 percent this year, about double Sanford C. Bernstein’s estimate for luxury market growth. The maker of 990-euro linen and silk sweaters reported earnings before interest, tax, depreciation and amortization of 58.2 million euros ($80.5 million) on revenue of 322.5 million euros in 2013, in line with analysts’ estimates.

The reaction of department stores’ buyers to Cucinelli’s fall-winter collection, which includes mink sweatshirts and layered tulle skirts, bodes for “a very beautiful year,” the chief executive officer said. The company gets more than half of revenue from third-party distributors.

Cucinelli has lost more than a fifth of its value in Milan trading this year, underperforming peers such as Paris-based handbag maker Hermes International SCA. Still, the stock has more than doubled since being offered to the public at 7.75 euros a share two years ago.

The shares rose as much as 3.2 percent and traded up 2.9 percent at 20.51 euros as of 5:02 p.m. in Milan, giving the company a market value of about 1.4 billion euros.

Chinese Consumers

While narrowing income inequality could hurt high-end demand, luxury consumers in emerging markets will probably provide a major boost to clothiers such as Cucinelli, which gets 5 percent of revenue from greater China, according to Luca Solca, head of luxury-goods research at Exane BNP Paribas.

“Chinese and emerging-market consumers at large are discovering it is not enough to own expensive accessories to be elegant,” Solca wrote in a February report. “Smart casual, even more so than formal wear, seems the way forward” and “Cucinelli has a specific positioning in contemporary casual chic, a niche not really addressed by competitors.”

That doesn’t mean the company will accelerate retail expansion because widely distributed luxury goods don’t appeal to the very wealthy, Cucinelli said.

“You have to be exclusive” the CEO said, adding he doesn’t plan to open men’s-only stores after after agreeing last year to acquire Italian suitmaker D’Avenza.

Cucinelli will open a half dozen directly operated stores this year, less than half the number it opened in 2013, Solca estimates. The clothier had 61 directly operated stores at the end of 2013, 16 of which are in greater China.

Sales haven’t been affected by the situation in Ukraine, Cucinelli said. The company gets about 5 percent of its revenue from Russia and the countries that made up the former Soviet Union, he said.

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