Brunello Cucinelli Spa

Good evening, Chorus Co-operators speaking. Welcome to the presentation of the 9 months 21 revenues of the Brunello Cucinelli Group. I'd like to remind you that all participants are in listen-only mode. Following the presentation, the initial presentation, there will be a Q&A session. Speakers will be Brunello Cucinelli, Executive Chairman and Creative Director, Luca Lisandroni, CEO, Riccardo Stefanelli, CEO, Moreno Ciarapica, CFO, and Pietro Arnavoldi, Head of Investor Relations and Corporate Planning. In order to receive help from an operator during the conference call, please press star followed by zero. Now I'd like to give the floor to Brunello Cucinelli. Please, the floor is yours. So here we are, and good evening, everybody. Kind investors, thank you for joining us dear investors, analysts, journalists. And we're all here, as always. Luca, Riccardo, our CEOs sitting beside me, Moreno, the CFO, Dario, his junior CFO, and the whole team, eight of us. Well, you know, to tell the truth, I often repeat that I really like these calls. And this is the last one this year. Alas, because there's none else actually scheduled. And we will have the next call in March 2022. And as it is custom, as we did this from the very beginning, when there is a call following the board directors, we have quite we have shorter press releases, whereas when there is no call, they will have broader press releases. So on January 10th, 2022, we will have a very broad press release, whereas in March, it will not be so long. So personally, I really enjoy hearing from you. You see, for us, for me, the best thing would be to speak to you once a month. So the way we did in the past year, year and a half, the toughest year in our life. So how about this call? How will this unfold? So first of all, I will read out the highlights. Then second topic, a few words about the company, which is back to business as usual, as during normal times. Third, worldwide sales. But honestly, they're doing so well, physical stores too, that we just want to devote a little amount of time to it and then to rather devote our attention to more important topics fourth product the designer of the year award 2021 and you know especially i myself are always busy with the product because i believe the products really is key and then the closing of the sales campaign spring summer 2022 fifth topic, the final focus for 2021, and the fairly detailed three-year project, 21, 22, and 23. It's October already, so we have details for you here. And then six, we'd like to devote some time to these new projects for the town of Solomeo and also for the Brunello Cucinelli brand for the coming 50 years. Net revenues of 502 million, up 9.4% at current exchange rates, plus 12% at constant exchange rates, compared to 3rd of September 2019. Excellent growth reported in Asia, plus 18%, Europe, plus 14%, and honestly, I don't want to read The decimals, but America's 7.9%, well, in this case, decimal is important, with a limited decline in Italy of 6.9%, minus 6.9%. Retail channel up 15.6% and wholesale up 3.3%. In the third quarter of 2021, net revenues of 188.8 million, up 12.5%, compared to the same time in 2019. And now the revenues vis-à-vis 2020. So growth of 32.7% at current exchange rates compared to 30 September 2020, 35.4 at constant exchange rates, then Asia plus 35.9, Americas plus 37.4, Europe plus 31.6, Italy plus 21. with the retail channel growing by 56.5% and the wholesale channel by 13.5%. This is what my comments on the highlights. The first nine months of the year have gone very, very well indeed. The autumn-winter 2021 collections are proving very successful worldwide and everywhere we are seeing a strong desire to return to physical stores. we honestly couldn't have imagined such an excellent result just a year ago. And all this leads us to envisage that we will end the current year with a wonderful 25% growth in turnover compared to 2020. Also thanks to the Designer of the Year 2021 award that was given to us by the prestigious British magazine GQ, Our brand is receiving countless certificates of appreciation for its stylistic expression, that's very important, as well as for the way it relates to humanity and the territory, the surroundings. And with the Spring-Summer 2022 order collection now complete, we can now envisage a next year lived in the healthy balance between work and private life, with a growth in revenues in turnover of around 10%. So these are the broad highlights. So I apologize, there's a figure that is wrong in revenues against 2020 growth, 32.7% at current exchange rates compared to 30 September 2020, plus 35.4% at constant exchange rates. They tell me that I misread something. Anyway, so company to start with. So we can confirm that we're all physically at work and 99% of us are vaccinated. For the remaining 1%, there are three doctors have been here from the beginning of the pandemic. They're still with us and they will be with us until the end of the pandemic and they are available daily for swabs. All the stores in the world are open and they're open with the very same stuff as before the pandemic. And, you know, this is very important. And perhaps it also has a very positive effect on our sales. As you know, in March 2020, we decided, we made actually three important decisions, very important ones. The first one, not to lay anyone off. This was March the 12th. And also, we decided to guarantee everyone the same salary as in 2019. We also decided not to ask for a discount. But, you know, you see, I keep saying that this is part of who we are. And with all the surplus goods, we set up this project called Brunello Cucinelli for Humanity that you are familiar with. And it really gives us beautiful human experiences. So another important thing is that we don't have any trouble or difficulties with raw materials, you see, because we have always believed in a healthy stock of raw materials. And even in 2020, it is true that for us, many raw materials really are the staples for us. So you have raw cashmere and you need to dye it afterwards so it's easier. As you know, all production is imperatively made in Italy with a true manual labor rate of 52%, which means a needle, thread, scissors, the true manual work. And then we have not reduced any major investments over this time, including investments in communication in 2020 and 2021 it was always between five and six percent and it stayed the same and during the pandemic in short we would like to call this time the year of rebalancing practically in all but a few points on a bda but i think it will be back it will go back to balance next year we feel you see inside the company, you can breathe that collective creativity on a daily basis, which I think you can only generate by working in a physical presence on site. Because if you work on site, there is a very clear cut distinction between family life and work, collective creativity and young people, young staff can really learn the corporate culture. Then onto sales, as we said before, We attend to things that are going very, very well, I would say all over the world, including in Europe. And as we were saying today at the board meeting, Europe is always very, very important for the taste and the way we showcase the product. You know that we believe in a collection that brings along the same taste anywhere in the world. Maybe sizes change. You would have more small sizes in Japan and large sizes in Germany, but the taste and the design is the same. And in general, whoever you talk to, everybody says that things are going very well. There is a great deal of confidence, positivity, new projects in physical stores, some people redevelop the store and there is a great craving to see touch try on garments and also get advice from the sales people especially for men's but also for women's it is important to talk about one's wardrobe on how to mix and match the different garments this is really true so just a few seconds on sales but it doesn't really need any more time because everything is going well. Product and sales campaigns bring summer 2022. So we can say that our products and consequently the brand, they are really experiencing great momentum. We won the Designer of the Year 2021 award from the British magazine GQ. And I have to say that this award makes us very proud. And it also gives the brand a very clear-cut connotation of taste and identity. And as a result, perhaps it also contributes a longer life to the brand itself. Since when we were young, you know, have always drawn inspiration from Ralph Lauren. You see, Ralph Lauren's taste is still the same. you see, still there after 50 years. So it seems to me that there is a very strong demand for particularly well-made clothing, and we have 85% ready to wear, a kind of clothing that is very handcrafted, exclusive, expensive, but that lasts over the years. Like if it was something you never throw away, that you can reuse, repair, recondition and mend. This is something very, very contemporary. We have finished now 20 days ago, finished collecting orders for men's and women's spring summer 2022, and the season went super well. And we also received excellent feedback from the press. And you know that if the feedback from the press matches the feedback from the clients, then it's easier. If there is a mismatch there, probably it means that the brand somehow, well, you need to work on it. So to conclude this first part, we can say that all this leads us to look forward to a very positive 2022, and we can say that we are continuing along our path with a very, very long-term project. taking care of the way human beings work and the workplace everything needs to be special there we try to stimulate creativity by trying to give human dignity and responsibility because this really ranks high on the agenda if i empower you you are more creative then we try to take care of all the micro enterprises, 365 of them, the third-party manufacturers that cooperate with us, and we try to give them a kind of long life to the enterprises and to our territory because this value chain, well, we can say that all together that we are attaching some sort of supply chain immortality to it. So, to conclude on this, we can say that the... You see, with this supply chain of Kashmir products, we hope that it will definitely be immortal, Kashmir products. We continue to believe in our way of communicating, starting from solo mail, which we define as the hamlet of Kashmir and harmony. So we keep repeating that our hamlet is the hamlet of Kashmir and the place where we try to live in harmony. And we claim that it is important to live and work in harmony with creation. This is something really important. This is actually what we mean by human sustainability. So now, Before moving on to major topics for the years to come, so the project for 21, 22, 23, the plan. As we are almost at the end of October, we are trying to give you our final thoughts on this 2021, which we keep saying we have defined it as the year of rebalancing, because apart from a BTA, everything went back to normal. Turnover up by around 25%. We grew slightly compared to the last call, but things are going so well that we feel pretty confident there. A BDA around 13%. Then inventory around 30% of turnover. And we consider this to be totally rebalanced. Net financial position, we should close with around 65 million. compared to 93 million in 2020, so we are going to rebalance here as well. Investments, always around 8% of our turnover. Clearly, sometimes you are waiting for an opening in a specific high street, and then when this does happen, we seize the opportunity and we pull forward our investments for the year but usually with 8% we can feel confident with 8% investments of turnover so that we can have modern stores, modern showrooms. Dividends around, going back to around 50% of profit as per the ongoing plan. So this is 2021. Well, hopefully God will help us. Now, a few highlights for 22 and 23. So this plan envisages a growth in turnover of around 10% per year. You see in the past we mentioned 8%, but we thought that we have to recover minus 10% last year. So this year 25% and the coming two years 10% per year. So that together we might then go back to our plan for the second five-year plan. So, to resume our path of the 2019-2028 project. So, the 2023 was the first milestone. I think that maybe we can reach that at the end of 2022. So, for the coming two years, what we envisage turnover of around 10% per year growth. Then a PDA that is rebalanced, an inventory that is balanced as it is already this year, with interesting stocks, as we were saying before, continuously improving net financial position, investments around 8%, then advertising between 5% and 5.56%, dividends around 50% of profits. My esteemed friends, these are the coming three years that we are working on. And we feel pretty confident. Now, on to some major projects that we have for Solomeo and the brand. First of all, as I was saying, we were awarded this important prize in London. It is an important prize for the taste, because one day maybe the company might suffer for a season or two, but the taste is always very well identified. Solomeo is very strongly identified as a place of Kashmir and also identified as a way of working. Kashmir, human capitalism and human sustainability, that is very, very important. So we keep working on this project. Then next week in Milan, we will be presenting to national international press this big project for Solomeo, and as you know, it is taken care of by the family foundation, not by the listed company, and we think that this project, and we can't reveal anything about it, but we'll let you know in a few days, we think that it will give Solomeo further strength for the coming 50, 100, maybe 500 years. Then in this village, you know, in this hamlet, we have the forest or the wood of spirituality on the hill. Then coming down to the village, we have the secular temple of the art, the theater. Then we have the headquarters in the valley. We have the winery with the monument to the earth, to Xenophon. Everything comes from, all things come from earth. And then we have the monument, a tribute to human dignity, something really fine that you saw. And then on Thursday, next week in Milan, we will present this new charming project. A bit on the expensive side, but I hope that you see our children and grandchildren will keep believing in this fascinating project. So as far as the project that is important for the brand and for Solomeo. Then we have another project, a 50-year project for the company. so why you might say always talk about 50, 100 years ahead. This is the 43rd balance statement of financial statements this year. And the first 43 years of the company, we went through COVID and we are about to restart. As you know, the place where we work, the places where we work, the buildings where we work, there's nothing new there. They have all been reclaimed These are former buildings of the 60s and the 70s that have been adjusted to modern life, modern working life. And I spoke about this with the Prime Minister Draghi too, because we in our surroundings, you see, we have 40% of buildings that are absolutely not in use. So I said to Draghi, if the government can give us a hand there, we should try and redevelop these properties, these buildings. Otherwise, our peripheries, our outskirts will be suffering. And truth be told, we had this chance here, very close to Solomeo. There is a huge area, a giant company of 50 years ago and until 30 years ago. And then as things go, so we were able to buy this from the court, from a tribunal a few days ago, 50 hectares. Everything needs to be reclaimed, obviously, because we are talking about factories and plants of the 70s and 80s making paint. But this will enable us, will enable us company to expand for the next 50 to 100 years, because we can build 70, 80,000 square metres, so over the years it will be very interesting. So it is a great momentum for us, because on the one hand we have the prize that we were awarded, on the other hand we have this project of the foundation that I'll disclose next week, and then I'd really like you to send us an email with your feedback on this, with your opinion. I like it or I don't like it. We'd really like to receive feedback from you. And then you should try and really understand. For us, this is, you see, these buildings are not for logistics. This is a true factory. This is a plant we manufacture here. We want to defend our know-how, our production system. So tomorrow, we have visiting us from the European community we have the ministers of agriculture because I had the pleasure about 20 days ago I spoke at the G20 talking about human sustainability so they're now coming to visit tomorrow but this area I mentioned before it really gives us the possibility to imagine factory for the coming 100 years. So it is some sort of collateral or guarantee as far as spaces or surface areas concerned. So there will be a growth in Solomeo, of the brand. We feel very confident because of that. Now, I wanted to tell you something with some emotion, actually. I'd like to disclose that at the end of next week, I have been called to contribute, to give a contribution on humanistic capitalism and human sustainability in front of an audience that I would never have imagined in my life. So I cannot really disclose what it is all about, but this really honours us because in front of this kind of world audience, we will have a chance to speak about humanistic capitalism, human sustainability and relations with human beings because you know that this topic of sustainability, well, what I really am keen on is human sustainability, because very often we talk about emissions, and of course it's just fair and right. We try to recover, to collect rainwater, but you see human sustainability is a great, great topic. So on October the 31st, I have been summoned to give this contribution, and I cannot sleep at night, and hopefully the heavens will protect us, but I think it is a good thing for the company, for the corporate culture, for Italy, for Umbria, because you see calling an entrepreneur to speak in front of such a worldwide audience to talk about humanistic capitalism and human sustainability really it is an honor for us and hopefully I hope that you will get to know this is something very very serious and important to us so to conclude so then you can ask all the questions that you want we would like to consider this current year for these great events that have taken place as the some sort of golden year for our company, I don't know if you agree, Luca and Riccardo, a golden year for the prize, for the Best Designer 2021, for the brand, for Solomeo, and for the acquisition of this area that secures us for the next 100 years, and also the participation in this great world event. So, very well for the brand, very well for Solomeo, But you should know that we work always focused but in a healthy mood of serenity because going back to work a healthy amount of hours with the right focus, with the right amount of online time, I'm really happy with that. So this is the end of my speech. Please ask all of your questions. then Pietro on Friday morning after the Thursday the 28th event please send them all the communication and then so they can receive everything so thank you very much for your attention let's open up for questions we are here about of course not just tonight you can ask away any time of the day of course You can feel there's a lot of positivity in our words, but I am fascinated of the way our Italy is doing. I'm fascinated by our President of the Republic, of our Prime Minister Draghi, who I think they represent the best qualities of an Italian individual. Then I want to tell you something really interesting. The roadshow that we had in London about a month ago in presence when we were given the prize, and it was the first Rotor after a year and a half, for the first time you analysts and investors, you told us that Italy is a credible nation, because you yourself told us that credibility is in the nation first and in the business later. And I said this to Draghi, I said this to everyone, you see investors now say that Italy is credible. So invest in Italy, hopefully we will always behave well and I'm very, very confident. Chorus Call Operator speaking. Let us now start the Q&A session. Whoever wants to ask a question, please press star followed by one on your keypad. In order to exit the booking list, please press star followed by two. Please speak into your microphone when you speak. Whoever wants to ask a question, please

Press star followed by one now. First question from the English Conference School, Antoine Belge.

Yes, good evening. It's Antoine Belge at Exxon BNP Paribas. Three questions, if I may. First of all, regarding China, in the third quarter, there's been some restriction due to COVID. So is it fair to say that you may have had a bit of a weaker month in August and since then, I think I've recovered it in September and also a few words about how the Golden Week went for you in October. My second question relates about potential new product categories for Brunello Cucinelli, especially I think in maybe areas like eyewear or perfume or jewelry. And finally, a bit of a more technical question, I think the There was some impact of conversion of some doors from wholesale to retail, notably in the U.S. Is it possible to quantify what was the impact in EuroMillions, both in a negative way for wholesale and positive for retail? Thank you very much.